Advantages & Disadvantages of buying a Shelf CC

Disadvantages of Shelf CC's include:  

1.    A Shelf CC is ALREADY registered with its business name, there’s a good chance that you may not like the name of the Shelf CC and will have to change it.

2.    A Shelf CC is ALREADY registered with its existing members, which means that you have to add yourself as a member before you can register for VAT, open a business bank account or qualify for a business loan until you’re registered as the new member of the Shelf CC.

3.    A Shelf CC is ALREADY appointed an Accounting Officer as required by law and there’s a good chance that you may want to have your own accountant and so will have to change that too.

4.    Changing the Shelf CC name is time consuming, a waste of money and is exactly what the start-up business CANNOT afford. It takes about 3-6 weeks to change the name of the Close Corporation.

5.    Your Close Corporation’s ‘Trading’ name is not protected by law because it’s not the reserved name that the CC was incorporated with. This means that if someone registers a CC with your ‘Trading Name’ you’ll have no recourse and this is what makes it much better to register a new CC with the name you intend to trade with. If somebody tries to register a CC with the same name as yours, their application will be rejected by the Registrar.

Advantages of Shelf CC's include:

1.    The truth is that there are NO advantages when it comes to buying a Shelf CC. It’s a common misconception that one can “Buy” your CC off the “Shelf”. In fact, you will be wasting your time & money buying a Close Corporation that has the incorrect/undesirable NAME, MEMBER and ACCOUNTING OFFICER details for your CC.


Conclusion

It’s highly recommended that you consider registering a new Close Corporation for your business instead of buying a Shelf CC, that’s the reason why I listed the Disadvantages before the Advantages. So unless you have EXTRA MONEY and EXTRA TIME to amend the Shelf CC details to suite your business needs, buying a Shelf CC is kinda foolish!

Register a Close Corporation

Registering your Close Corporation is probably the most exciting aspects of establishing a business for the first time. CC registration is unbelievably easy when you have all the necessary information at hand and it can take no more than a couple of minutes to complete the online cc registration form. In this post I’ll explain the steps involved in registering your Close Corporation.

There are a number of legal requirements and certain paper work needs to be completed and signed when registering a close corporation. The most important of these documents is called a Founding Statement.

The registration process is explained below:

The Founding Statement of the Close Corporation requires the following information.

1.    Full name of the Close Corporation.
2.    Street address of the Close Corporation.
3.    Postal address of the Close Corporation’s registered office.
4.    Principal activity of the CC.
5.    Date on which the financial year ends.
6.    Full names and identity numbers of each member.
7.    Interest expressed in percentage of each member.
8.    Each member’s contributions to the Close Corporation.
9.    The Founding Statement of the Close Corporation needs to be signed by every member.
10.    An accounting officer must be appointed to the CC as he will draw up the financial statements
11.    The name and address of the accounting officer of the CC.
12.    Once completed the Founding Statement is sent to the Registrar of Close Corporations.
13.    The Registrar of Close Corporations will then issue a Certificate of Incorporation and a Registration number once approved. A copy of the Certificate of Incorporation will be kept by the Registrar, another copy is sent to the Close Corporation and a third copy is sent to SARS (South African Revenue Services) to register the business for tax purposes.
14.    Once the Certificate of Incorporation has been issued the CC may commence business.

Tips: It’s is a good idea to have a few names for your CC as your first choice might not be available or is rejected by the Registrar. If you need to have your business registered formally ASAP, then you need to register it NOW as the time it takes to register your CC is totally dependant on the workload of the Registrar.

Conclusion

Registering a Close Corporation is quick, affordable and easy with our online CC registration form. Once you’ve completed the electronic application form, you simply need to pay the cost for registration and leave the rest to us. That’s it, you’re done!
All the best for your new business!

Disadvantages of a Close Corporation

All forms of business ownerships have their advantages and disadvantages that one needs to take into consideration when forming your business. Weighing the advantages and disadvantages of a Close Corporation will be very important when deciding what form of ownership will be best for your business.

Disadvantages of a Registering a Close Corporation:


1.    The Close Corporation Act of 1985 restricts the number of members of a CC to a maximum of 10, which limits the expansion of the establishment.

2.    Members of a Close Corporation can be personally held liable for the losses of the CC if the member acts irresponsibly on behalf of the business.

3.    When applying for a loan, banks or other financial institutions might require the financial documents of the CC to be audited. Financial aid will be considered only after the Close Corporation has been audited.

4.    It could be difficult for members to leave the CC or to pay a member their portion because all members must agree to dispose of a member’s interest.

5.    Because every member may act as a representative or agent of the Close Corporation, the CC is bound by its member’s actions, introducing a potential risk to the business entity!

6.    A Close Corporation cannot be sold to a company simply because a Company cannot be a member of a Close Corporation.

7.    If a Company wants to take ownership of a Close Corporation, the CC first needs to be converted into a company.

8.    A CC cannot become part of a group structure, meaning that a Close Corporation cannot become a member of a Company or another Close Corporation.

9.    Major decisions concerning the Close Corporation can be made by member/members who have a total membership of at least 75%. Decisions like these must be in compliance with the CC agreement drawn up between the members of the CC.

10.    One of the main disadvantages of a Close Corporation is that it’s taxed as if it were a Company. This means that the tax rates are substantially higher than tax rates that apply to partnerships and sole traders.

Conclusion


It’s highly recommended that you consider the ADVANTAGES and DISADVANTAGES of a Close Corporation before deciding on what form of business to establish.

Advantages of a Close Corporation

All forms of business ownerships have their advantages and disadvantages that one needs to take into consideration when forming your business. Weighing the advantages and disadvantages of a Close Corporation will be very important when deciding what form of ownership will be best for your business.

Advantages of a Registering a Close Corporation:

1.    The registration of a Close Corporation is a relatively simple, quick and affordable process as its not expensive, time consuming and has only a few regulations to adhere to.

2.    A CC doesn’t have as many legal requirements that a company has for example. Close corporations are not required to have annual financial statements audited and are not required to hold annual general meetings, making it easier to run than a company!

3.    The CC is regarded as a legal entity/person; this is an advantage because it means that the continuity of a CC is not linked to the status and life of the members.

4.    Members of the CC are exempted from normal income tax when income from the CC is distributed.

5.    Close Corporations may assist a member financially to acquire an interest in the corporation.

6.    A Close Corporation is normally able to access a greater amount of capital than a sole proprietor or small business as it’s viewed as a formal legal entity/person as mentioned in point No.3.

7.    Members of a CC have a limited liability for the debts of the CC except under certain exceptional circumstances. E.g. where a member acts irresponsibly.

8.    Making changes/amendments to the Founding Statement of a Close Corporation is easy and inexpensive.

9.    A CC has no board of directors like a company, management is therefore the responsibility of the members, as they are usually hands-on with the day to day running of the establishment.

10.    The owner’s interest in the CC does not need to be in proportion to their contributions (Capital). An example of this could be when one member contributes less capital because they have specific skills that are needed in the CC.

Conclusion

It’s highly recommended that you consider the ADVANTAGES and DISADVANTAGES of a Close Corporation before deciding on what form of business to establish.