4.2 How feasible is my business?  (Page 2/3)

There are mainly four options: you as individual could be the owner, you could establish a close corporation, you could create a company or you could take up a franchise.

Option 1: you assume ownership as individual

You can own the business in your personal capacity. That means that you as person

will be taxed on any profits of the business (maximum 40%), and

will be held accountable for debts that are incurred by the business (which means that, should the business not be in a position to pay the debts, you could lose your possessions and means of livelihood).

You could also invite other people to become co-owners, but that is dangerous, because there is always the possibility of misunderstandings and tension in the management of the business.

Option 2: you establish a close corporation

You become a member of the corporation and your personal assets are protected. Your accountability for any debts of the corporation does not exceed the amount of capital that you contributed. The income tax is fixed at 30%, which is substantially less than in the case of an individual. You can also allow other people to become members, which means that you obtain additional financial support and do not stand alone. A close corporation functions in terms of a specific law so the interests of all the members are protected. The books of a CC must be done by a chartered accountant. There can be 1 to 10 members.

The name of a close corporation always ends in CC, for example Laser Services CC .

Option 3: you create a private company

A company is managed in terms of a specific law. There are a number of requirements that do not apply to a close corporation. There must be a board of directors and the names of the board members must be made available to the Public Registrar of Companies. Fully audited annual statements must be submitted annually. Annual general meetings must be held according to prescribed guidelines. All these requirements make the process of establishing a private company quite expensive. The name of a private company ends in (Pty) Ltd.

Option 4: you take up a franchise

A franchise has many advantages for an individual. He gets his own business, but has the support of the group and shares in advantages such as purchasing stock at lower prices, having access to tried and tested recipes (e.g. in the case of a restaurant), etc. Well-known names such as SPAR and 7-Eleven are examples of franchises.

The following report from Die Burger about someone who started a successful business on a franchise basis illustrates the advantages of this option.

SOURCE

FROM SCRUBBING FLOORS TO RESTAURANT OWNER

Nellie Brand

Ms Jessica July is the only black owner of a Juicy Lucy shop in the Western Cape.

Last year, when she took over the shop, she was the only black owner of a Juicy Lucy shop in the entire country. This businesswoman, who had to struggle to obtain a bank loan to buy her Juicy Lucy shop in the Kenilworth Shopping Mall, intends to buy two more of these shops soon.

July, who was born in Guguletu, is regarded as a text-book case of someone who started with nothing and now owns a small business that is profitable.