Before you can register your business with the relevant authorities, there are quite a few things to consider such as the business structure and legalities, continuity of the business, tax implications on your chosen business choice, the effect that insolvency if the business goes into debt and how same will be financed. Here are some of the basics you need to know:

Legal entities:

There are four legal entities that aspiring business owners’ may choose from:

Sole Proprietorship:

This is the most general form for the small business .The owner gains all the profits and is personally liable for all the losses. A sole proprietor is not separate from the personal estate of the owner and a business operating as such will therefore cease to exist after the death of the owner.

A partnership:

A partnership is an association of two or more persons (but less than 20) who are contractually bound to each other to operate a joint business venture with the objective of making a profit. All partners are personally liable for the losses of the business. A partnership will dissolve upon the death of any of the partners.

A private company:

A private company is a legal entity separate from the personal estates of the owners, all assets, debt and profits belong to the company .A company continues to exist past the death of its members . A private company can have no more than 50 members.

Inter vivos trust:

A business trust is a trust where a trustee does not simply protect and manage trust assets, but also preliminary uses these for carrying on a business for a profit in order to benefit the trust beneficiaries or to further the aims of the trusts. Although this trust was never meant to be used as a legal entity for a business, it can be used as such .The assets are owned by the trustees in their capacity as trustees and will be separate from the personal estates of the trustees.

How do I raise capital to finance the business?

A private company raises capital by selling shares in the company to investors and this form of business provides the owner with more options for financing the business.

A sole proprietor, a partnership and a trust can only raise capital from outside the business in the form of a loan.

Insolvency:

Although a lot of business owners are often convinced that their businesses will succeed, it is important to consider what will happen in the event that the business becomes insolvent.

If the owner trades as a sole proprietorship or partnership, his personal estate becomes liable for all his debts. In the case of a private company or a trust the business is a separate legal entity meaning all the debt s of the company will be recoverable from the company and not the personal estates of the owners provided that the owner did not sign any surety in his personal capacity for the debts of the business.

Tax

Another important element to consider is the tax implications. The different legal entities are all taxed differently. A sole proprietorship and partnerships are taxed at an individual scale between (18% and 41%). A company is taxed at a flat rate of 28%.On any amount declared as dividend, 15% dividend tax will be levied. A business trust is taxed at a flat rate of 41%.

Before venturing into a business it may be a good idea to speak to a professional for more information.