FORMS OF OWNERSHIP

1.3 CLOSE CORPORATIONS

A close corporation is a simple, inexpensive way of forming a legal personality. 

Formation of a close corporation:

A Founding Statement if used to form a close corporation. This document is a written agreement. It must be registered with the Registrar of Close Corporations.

Contents of the founding statement:

• The name of the business.
• The aims of the business.
• The address of the registered office.
• The names, identity numbers and address of each member.
• The contribution of each member.
• The size of interest, expressed as a percentage, of each member.
• Details of the accounting officer and her/his consent to act as accounting officer

Characteristics of a close corporation:

• The members of a close corporation may be from 1 to 10.
• The name must end in CC.
• It is separate from its members (owners). This means that this business is a legal entity.
• A close corporation has unlimited continuity. A change in members does not affect the continuity of the business.
• The members are not liable for debts of the business. They have limited liability.
• A document called the Founding Statement is drawn up to form a CC.
• Ownership is expressed as a percentage (%) interest in the business. The total % interest of all the members of the CC will be equal to 100%.For example: if 4 members have an equal % interest in the close corporation then each will have a 25 % ownership

Advantages and disadvantages of a CC: