Close Corporation

Close Corporation

1. Characteristics

   • Suitable for small businesses
   • 1-10 members
   • Name must be registered and end with cc
   • Founding statement must be completed
   • Each member has in interest in cc
   • The cc is a legal entity and can enter into contracts
   • Continuity of existence
   • Is a legal person and pay tax
   • Dividends is exempt from tax

2. Disadvantages

   • Capital is restricted to what 10 members can contribute
   • Liability status can be lost
     • if members are in violation of their fiduciary duty for example omitting the letters cc when signing a contract.
   • Consent of fellow members is required
     • when selling an interest in a cc
   • CC can only be sold to a natural person
     •  and therefore not to another cc or company
   • Must appoint an accounting officer

3. Advantages

   • Easy and inexpensive to establish
   • CC is a legal person therefore responsible for its own assets
   • Members have limited liability for the debts
   • An indefinite lifespan
     • means that members can change without affecting the continuity of the cc
   • Members are allowed to participate in management of business