There are many benefits gained through the formation of a company, as opposed to a sole trader or partnership, such as protection from personal liability.

How you structure your company is dependent on your requirements, and we will liaise with your accountant in drawing the most tax effective vehicle for you.

The most common form of company is proprietary limited (Pty Ltd) – in other words, a private company with its officers having limited liability.

A sole director/secretary is a common form of a proprietary limited company.

Despite this protection, you may still be exposed where, for example, you are required to give a personal guarantee.

You also need to be fully aware of the strict duties the law places on the officers of a company (including directors and secretaries) – for example, to act bona fide and avoid conflicts of interest.

Breach of those duties can have serious civil and criminal consequences.

Sometimes, your accountant can, for taxation reasons, recommend the formation of a discretionary family or unit trust.

If a company is insolvent, you should also be aware that the company should not trade.

If it continues to trade, then the officers can be subject to prosecution, and severe civil penalties can also apply.

For further information, please contact our commercial law partner, Peter Elliott, or Kathleen Elliott.