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THE DIFFERENT TYPES OF ENTERPRISES

 
Accounting principles and procedures relate to all business activities irrespective of the legal form of the enterprise within which the activities take place.
There are however differences in the application of principles and procedures as a result of, inter alia, legal requirements, in relation to the division of profit and the determination of owners’ equity for the different forms of enterprise. The three basic types of enterprises are the sole proprietor, the partnership and the company.

The Sole Proprietor
The individual who wants to start his own business faces few obstacles. In most
instances it is merely necessary to acquire a licence of some or other type. The individual may commence business as soon as the licence has been
acquired, and takes all decisions himself, receives all profits (losses), and is personally liable for the obligations of the business as well as being sole owner of its assets. The owner’s interest in a sole proprietorship comprises the capital which he deposits plus profits which are earned less losses which are incurred and amounts which are withdrawn from the business for personal use.

 
The Partnership
1. Introduction
A partnership is a legal entity which arises as a result of an agreement between two or more but at most 20 persons,’ in terms of which each contributes something to a legal enterprise with the purpose of making a profit and dividing it.
No formalities are required for the coming into existence of a partnership. For example, it is not necessary (although desirable) that there should be a written partnership agreement.
Partnerships are especially encountered in businesses where the element of personal service is important.
2. The nature of a partnership
In South Africa there is no specific legislation controlling partnerships, and the principles of common law are therefore applied. A partnership is not a legal person and thus has no independent legal existence, apart from the members who make up the partnership. The partners are jointly and severally liable for the obligations of the partnership and enjoy the rights attaching to the partnership. They are therefore common participants in all the assets, and are all liable for the obligations of the partnership.
3. Partnership accounting
Partnership accounting is characterised by three important aspects:-

a)     A capital account is maintained for each partner. Cash and other assets (at fair values) which are contributed by the partner as his share towards partnership capital, are credited to his capital account.

b)     A current account is kept for each partner. All changes in a partner’s
share in the owners’ interest in the partnership is recorded in this account.

c)     The profits or losses of the partnership are distributed to the partners,
usually according to an agreed basis set out in the partnership agreement.

Accounting procedures for a partnership are in many respects similar to those of a sole proprietor.

Companies
From the preceding it should be clear that the property of a business without legal personality belongs to the owner (owners) of the business, but he (they) are also liable for the debts of his (their) business. All legal transactions of such an undertaking are entered into by the owner(s). Sole proprietors and partnerships are the most usual forms in which enterprises without legal personality are encountered.
A business with legal personality has legal capacity and can own property in its own right, incur debt and execute all other legal transactions, acting as a person. Such legal persons are usually incorporated businesses and arise especially by means of companies with share capital. Like a partnership, a company is an association of persons who co-operate with the aim of making a profit. In contrast to a partnership however, a company is a legal entity. It comes into existence as a result of legislation, is an entity which is separate from its owners (known as members of the company), has a continuing existence independent of that of its members and has rights and liabilities in its own right. In South Africa all matters relating to companies are regulated by the Companies Act, 1973 (Act 61 of 1973).

Take a deep breath while you get ready to dive into the pool of red tape, or find some easy answers.

If you are about to start a new business and if you are a first time business owner, you will probably be wondering which form of business is the right one for you. However before you can even decide this, you will have to be aware of the main forms of business available in South Africa today, and their relative benefits and disadvantages. You will also be wondering what else there is. What other registrations will be necessary? Where do you go, what will it cost, how long will this take, and so on.

Experienced and successful business owners don't bother with any of this. They already have company secretaries, auditors, accountants and other business advisers lined up. They know what activities to focus their attentions on - the business, NOT the red tape of bureaucracy. One of the differences between the new business owner and the experienced old hand, is the business network they use.

All this unfortunately will divert your attention from the job at hand and will interfere with the business. After all, why spend time on the red tape rather than on your business? Considering the huge number of BUSINESS issues that you must attend to, why spend your time on the wrong things? Only because you must, by law, and because you have no alternative ... except if you outsource.

So, once you have your business plan in place, and you have your investors and finance lined up, what are the various registrations which are applicable? What red tape must you wade through? Here is a list:

1. Registration of Close Corporation or Private Company with the registrar. (Some people will advise you to seriously consider a trust, or to act as a sole proprietor, but we will be dealing with these in later issues of this web page). This registration must be preceded by the reservation of your business' name.

2. A proper company register and statutory file must be compiled. These must be maintained. Since 1^st May 2005, all private companies must now also submit annual returns to Cipro confirming their certain statutory details. This will be charged for by Cipro, and can only be done by registered agents over the Internet.

3. VAT, PAYE, UIF and SDL registration.

4. Your business will also require a tax registration. If the members or shareholders are not taxpayers, they will be required to register.

5. Workman's compensation registration.

6. For certain categories of business, local government licenses are required. Certain types of business are highly regulated, for example vehicle and trailer manufacture, and special licenses will be necessary. Export and import licenses may be applicable for certain businesses.

7. Bank accounts must be be opened.

8. Nowadays, not only does it make sense to have a physical as well as a postal address, but an email address, preferably linked to your business is a good idea. The registration of a web domain for your business, although not a statutory obligation, is becoming an indispensable business tool. Get your web domain registered.

9. Without business cards, letter heads, and essential custom stationery, a business cannot present an appropriate professional image at the start. Again, this is not a statutory requirement, but will go a long way to ensuring that your business is properly launched.

The list goes on. There is the PAIA act, and there is still more.

But, for a moment, let us contemplate what your time is actually worth.

If your time was spent on your business, growing the customer base, recruiting the right staff, preventing shrinkage, building relationships with customers, and so on - what would this time earn you? Is this R50 per hour, R150 per hour or R500? Your business will be different to every other - it will have its own answers. So how much time can you afford to spend chasing the red tape? The answer will probably be "As little as possible because that will consume money, not earn it." Quite correctly, a person that knows the red tape environment may also get through it a lot faster than you will. That's efficiency.

So what would you have to pay for getting the job done?

Let's look at an example. If you were to register a new private company, and wanted to have a complete company kit, you would be looking at:

• Reserving a name
• Registering the company
• A company register book would be compiled
• A statutory file would be created
• Share certificates would be printed and properly recorded
• Your VAT registration would be done (when applicable) as well as registration for:
• PAYE,
• SDL and
• UIF -
• even your company income tax number would be necessary.

But you may feel that an original registration will take too long, and you actually needed the company yesterday. So now what?

Well, you could consider a shelf company. A shelf company is a pre-registered company that has been declared dormant and is guaranteed to have never traded. Again, there is no point in buying a shelf company without making some changes to it. These normally are name, director changes, shareholders, etc. All these changes are charged for by the Registrar of Companies.

"So what's the deal?" I hear you ask. The similar end result as for Kit A, Kit B provides you with a shelf company with essential changes implemented: Name change, new directors, address changes and new auditor appointed. Of course you must also compile a company register book would and a statutory file is also. Share certificates will be printed and properly recorded. Your VAT registration would be obtained (when applicable) as well as registration for PAYE, SDL and UIF - even your company income tax number can be obtained. The added bonus with Kit B is that you have the company registration number almost immediately available. You could start trading, legally, right away.

Again, what would the ability to be able to do this be worth to you? especially considering the saving in red tape? The price for KIT B is R3,900-00 R2,970-00, and if you need a company in the next few days ...

However, not all business require a private company as a business structure. In South Africa the Close Corporation (abbreviated CC) has been created to provide some limitation of liabilities to smaller businesses. A CC may have up to 10 members, but can only be owned by natural persons i.e. real people, not other companies or CC's. This form of ownership is low cost to run (not requiring expensive audits) and currently also has no Cipro Annual Returns obligation, nor does it cost much to register. While there are some things you need to know about CC's, these are a useful form of ownership for business that have a few natural persons as owners.

A CC, inclusive of name reservation, a CC statutory file, member's share certificates, VAT registration as well as PAYE, SDL/UIF is available at at R1,530-00. This is particularly good if you consider that this includes a gift CC manual worth R277-00 giving you all the important ins and outs of running CC's in South Africa. To ensure that you receive the free gift, and this special price click on the following button.

As with private companies, on occasion a shelf or pre-registered, dormant CC may be just the tool you need to get that business on its feet in double quick time. For a Kit C, which includes amendments to the founding statement changing the business name, members, and addresses, and of course PAYE, SDL/UIF,  you only pay R1,790-00. This special price is only available to you for the next 12 days. Just click on the next button for this free bonus offer now.