Different Types Of Companies According To The Act (2008) And The Procedure Involved In Forming A Company

A company is a separate legal person from its shareholders, has Perpetual succession and Limited liability. The two types of companies are profit companies and non-profit companies.

Profit companies:

a) Private company

A commercial organization that operates on a for-profit basis and partakes in selling goods or services to consumers. The management of a business firm will typically develop a set of organizational objectives and a strategy for meeting those goals to help employees understand where the company is headed and how it intends to get there. The name ends with “proprietary limited “or “(pty)Ltd”.

b) Public company

A company whose securities are traded on a stock exchange and can be bought and sold by anyone. Public companies are strictly regulated and are required by law to publish their complete and true financial position so that investors can determine the true worth of its stock. The name ends with limited or Ltd, the minimum numbers of directors is 3 who also manage the company.

c) Personal liability company

The Company’s Name must end with the word “Incorporated”. It operates on the principle of ‘personal liability’. This term means that the directors of the company, as well as previous directors, will be responsible for the debts of the company. The owner of a Personal Liability Company Inc. is considered separate from the company. That means the creditors cannot seize the owner’s personal assets such as a home or Investments.

d) State-owned company

A state-owned enterprise (SOE) is a legal entity that is created by a government to partake in commercial activities on the government's behalf. It can be either wholly or partially owned by a government and is typically earmarked to participate in specific commercial activities. Ends with Soc ltd everything.

Non-profit company

A non-profit company is granted tax-exempt status by the Internal Revenue Service (IRS). Donations are made to a non-profit company typically tax deductible to individuals or, but the non-profits must make financial and operating information to the public so that donors are certain their contributions have been used well. Non-profits pay no income tax on the donations they receive or on any money they earn through fundraising events. Non-profit companies are sometimes called NPOs.

The procedure of forming a company

Company name

As the entity has to have an identity it’s essential that the first step in forming a company is to reserve a company name that will be submitted to the CIPC asking for a suitable name, as CIPC will be able to prevent having companies from using the same name and the use of an undesirable name the ending of the name is also demined by the type of company it is.

The company’s objectives and goals

As the company is to comply with the law in terms of the 2008 companies act ,incorporations of the company has to hand in a memorandum of incorporation as the primary document the MOI is defined as a document that sets out the rights ,duties and responsibilities of the shareholders and directors who are written and have signed the MOI and a notice of incorporation must be completed with the commission as it registers the companies .It is a must that the MOI is of the company must accompany the notice as well as the prescribed fee and will later receive a registration number that is used by that only company as well as a registration certificate .The MOI contains all the objectives of the company and shows exactly the positions of the members and their roles in the company the rules are to bind the company and the shareholders ,the shareholders of the company the company and directors the officers and the company. The objectives of the company can also determine the type of company it becomes whether its objective is to maximize profit or to take care of the people who are around it this can make it a profit company or non-profit company.

Legal powers of a company

As according to the 2008 companies states that a company has the legal capacity and the powers of an individual, only when the company is unable to do activities such as getting married in other acts of mixing with other companies and forming partnership it is allowed to do so with no restrictions what’s so ever.

Share capital of a company

When it comes to how the company is to generate its capital when it comes to issuing shares this is decided by the type of company it is and who it is allowed to issue the shares to whether it is allowed to issue shares to the general public or not this is to be stated in the companies MOI the type of shares issued and to the members of the company or outside the company .The rights of the shareholders to share the profits and receive dividends according to the dividend policy of the company ,the right to choose the board of directors and the rights to sell the shares of the company are to be stated in the MOI when forming a company.