Private company vs Sole Proprietor

Ever wondered what the difference between the 2 is? Well, wonder no more!! We will explain the differences and requirements for each below.

Sole Proprietor

If you trade as a sole proprietor, the individual and the company is the same legal entity. The name of the company will be your own initials and surname trading as the company name. The trading name has to be registered at SARS on your personal income tax profile.

A sole proprietor has to compile financial statements consisting of an income statement, balance sheet, statement of owner’s equity and notes to the financial statements. The sole proprietor does not file a seperate tax return. The financial records of the company is submitted on the individual’s income tax return.

A sole proprietor has to submit provisional tax returns to SARS twice a year.

A sole proprietor does not have any directors or shares.

Private company

A private company needs to be registered at CIPC. A private company is a seperate legal entity from the shareholders/ directors.

A private company has it’s own incometax number with SARS, and needs to submit a seperate income tax return. The private company has to compile annual financial statements consisting of an income statement, balance sheet, cash flow statement, statement of comprehensive income and notes to the financial statements. These financial statements needs to be signed of by an independent reviewer.

A private company can issue various types of shares, and have multiple shareholders. The shareholders can appoint a director, or various directors to run the private company. The MOI, or memorndum of incorporation, dictates how the company should be run.

A private company also has to submit an annual return to CIPC every year in order for the company to stay active.

Itis also possible for a private company to have a trading as name. This name has to be registered at SARS. A private company also has to have a public officer registered at SARS, which can be one of the directors or shareholders. The public officer is the responsible person that needs to ensure that all the tax matters are kept up to date. And ensure that all returns, and payments are made in time.

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what is the difference between a private company and a sole proprietor

Andre

I have over 10 years experience in dealing with CIPC, tax and accounting matters. I have been self employed for the last 5 years. We always strive to give customers the best advise and service possible.