One of the first decisions you'll have to make on your journey to being a Mzansi-preneur is what form of ownership you'll choose for the business you'll own. Let's get you started!
So you've been sitting on that great business idea forever? It’s time to take a leap of faith and just go for it! Deciding on the right type of business entity for you is an important step to take early on. Here’s some handy info about the different types of business ownership to help you.
4 different forms of ownership:
This is the simplest business type. Also known as a sole trader, this is usually a much smaller business or side hustle that is owned and run by one person. You can say the business is an extension of the owner - it does not have its own legal entity, meaning the income of the business is all for the owner, as are the taxes and any liabilities.
The benefits of being a sole trader:
- It’s quite easy to set up
- You have total control over and ownership of the company
- You have a right to all of the profits
Here are some tips to help you as a sole trader:
- Keep the taxman happy
Remember, you're liable for everything, including completing your tax returns every year. Keep records of your business income and expenses and put some of your earnings away so that you don’t have to cough up a big amount of moola when tax season comes round!
- Set up a business bank account
As tempting as it may be to spend all the money on yourself, the only way to keep your Mzansi-preneurship dreams alive is by keeping the money for your business in your business. The easiest way to do this is to split your personal and business finances. Set up a business bank account where you’ll keep your business moola, then transfer your wages into your own personal account. Keep your money and your hustle money apart with TymeBank. Vula iEveryDay Business account online in less than five minutes.
- Save your moola
As a sole trader, it’s up to you to raise any funds needed for your company. You can do this either with your own assets or with the help of loans. Let’s face it, it’s not always easy for most small businesses to get a loan, so save, save, save. It will help you in case you want to buy some equipment, or need to reinvest into your company. Cleva, right?
As the name suggests, this type of business ownership involves two or more co-owners running a business together. The co-owners put their money into the company, and each receives a portion of the profits while also sharing a portion of the losses.
A private company, which you may know as a Pty Ltd or proprietary limited company, is a legal entity that exists independently. As a result, the business will be recognised as a separate legal entity, even though you start it on your own. The owners are known as the shareholders.
A public corporation is one whose stock is listed on a stock exchange and whose ownership is distributed to the general public. Unlike Pty Ltd companies, public listed companies are classified as public because stock can be purchased by anyone. After that, anybody can enter the business as a part-owner.
Vula iEveryDay Business account online in less than five minutes. No paperwork and no monthly fees. It’s a great and easy way to get your business banking done. Get started now. Want to join our Mzansi-preneur community? Whether you’re running a side hustle or a fully-fledged business, you can share ideas, concerns and advice with like-minded business owners on the TymeBank Mzansi-preneurs Facebook group.