Business Entities and Structures

Sole Proprietor

• Simplest form of business
• Widely used for small business and by entrepreneurs and farmers
• Limited formalities
• Individual income tax rates (18% to maximum 45%) – 2026
• Capital gains tax maximum rate 18% (40% × 45%) – 2026 (annual exclusion R40 000)
• Owner personally liable for the business debts

Partnership

• Two or more persons operating a business and sharing profits
• Partnership agreement recommended
• Individual income tax rates (18% to maximum 45%) – 2026
• Capital gains tax maximum rate 18% (40% × 45%) – 2026 (annual exclusion R40 000)
• Partners personally liable for the partnership debts and not restricted to individual debts

 Close Corporation

• Separate legal entity in corporate form
• Regulated by the Close Corporations Act and Companies Act
• Natural persons and trusts (subject to restrictions) can be members – maximum of 10
• Income tax rate 27%, however Small Business Corporation rates may be applicable 0%, 7% and 21% – 2026
• Capital gains tax 18% (28% × 66.6%) – 2026
• Members enjoy limited legal liability

Company

• Separate legal entity in corporate form
• Regulated by the Companies Act
• Unlimited shareholders – also legal persons (companies, close corporations, trusts & other)
• Income tax rate 27%, however Small Business Company rates may be applicable 0%, 7% & 21% – 2026
• Capital gains tax 18% (28% × 66.6%) – 2026
• Shareholders enjoy limited legal liability
• Requires annual audit

Trust

• Recommended for “protecting” assets
• Estate planning tool
• Trustees administer and manage assets on behalf of beneficiaries
• Income tax rate 45% of income not distributed – 2026
• Capital gains tax 30% (40% × 75%) of gain not distributed – 2026
• Trustees not personally liable unless negligent in the performance of their duties or party to fraud