A close corporation is like a company, only less expensive and less complicated to run. From 1 May 2011 no new CC’s can be created and the conversion from company to CC is also not allowed.

A CC is more expensive to run than a partnership or sole trader because you need to pay an ‘accounting officer’ to do the books of the business. You also have to keep records for the CC and each member has to keep records for tax purposes.

The people who own and manage the close corporation are called members. There are no directors or shareholders or a chairperson of the board, like a company has. A close corporation cannot have more than 10 members.

The law sees a close corporation as separate from its members. This means that unlike a sole trader and a partnership, the assets and debts of the business belong to the close corporation, and the assets and debts of the members have nothing to do with the CC.

For example, Cool Leathers CC buys leather from a supplier to repair shoes. The CC does not pay the supplier for six months. The supplier decides to go to court to get his money from the CC. If Cool Leathers does not have the money to pay the supplier, the court can only take the things that belong to the business, Cool Leathers, to pay the debt. The court cannot take the private things that belong to Vusi and Linda, who are the members of Cool Leathers.

Financial reporting has now been made the same as that of a company. From 1 May 2011 a CC may be subject to an independent audit or accounting officer’s report. The criteria will be the same as that of a company.

If the business is a CC and the CC has a letterhead, the registration number of the CC and all the names of the members must be printed at the bottom of the letterhead. The registered name and number must also appear on cheques.