Real Estate Investor Magazine South Africa Dec/Jan 2016/17 | Page 62

BUSINESS STRUCTURES

The Pros and Cons

of a Sole Proprietorship
The easy way or path to Business Suicide?
BY JOSE’ DELGADO

A

Sole Proprietor is in essence the simplest
way of conducting a business, carrying on a
trade or the provision of services. There are
no incorporation or registration procedures. A Sole
Proprietor (SP) is in essence a natural person that
carries on a business in his or her own name. Many
medical professionals conduct their business in this
manner.

The Upside

In certain instances there is a necessity to register the
appropriate statutory bodies and further compliance
with various statutes. The SP trades as, the name
of the business it conducts. It is not registered with
any specific body, the SP needs to ensure that the
trading name does not conflict with the Consumer
Protection Act (and formerly the Business Names
Act) nor that it is in conflict with names registered
for Close Corporations or Companies under CIPC
registry. The name must further not infringe upon any
trademarks or registered intellectual property rights.
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DEC/JAN 2017 SA Real Estate Investor

A SP is liable for taxation as defined in the Income
Tax Act. The Sole Proprietor will be a provisional
taxpayer. A SP does not need to comply with any
formal accounting or auditing requirements or
administration as set out in the Close Corporations
or Companies Act.
There are CGT exclusions on the value of the small
business assets if it is disposed or on the death of the
individual, subject to a maximum amount of R1, 8
million and certain qualifying criteria that the Seller
or deceased is under the age of 55 and the business or
assets are valued under R 10 million.

The Downside

Trading as Sole Proprietorship is the most risky
manner of conducting a business or trading. There is
no distinction between the business, assets, cash or
the goodwill of the business and the creditors and the
liabilities of the business. In the event of any claims by
creditors, banks, employees, customers, landlords or
SARS all the assets of the Sole Proprietor, including
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