Types of Business Ownership Part 4 - Close Corporation - Information for young learners

A Close Corporation or CC can consist of anywhere between 1 to 10 people in the business.

Characteristics of Close Corporation

1. The name of the business ends in 'cc', like Peter and Sons CC.

2. A Close Corporation is seen as a legal person so the members are not held personally responsible for the debt of the company.

3. The members owns and controls the company and all the decisions.

4. If there are legal documentation that needs to be signed, at least two of the members have to sign.

5. If you want to become a member of this company, you must make a contribution when it starts.

6. Members do not have shares but ‘interests’ expressed as percentages, and they may not dispose of their interests without the consent of the other members. .

7. Close corporation financial statements may be required to be audited

8. The business is not influenced it one of the members withdraw and can still carry on in the same way.

9. Each of the members get payed according to the amount of interest they put into the business.

Advantages of a Close Corporation (CC)

1. It is easy to start and maintain a CC because there is not a lot of legal requirements.

2. A Close Corporation is not required to hold annual general meetings (AGM). Meetings are not compulsory and can be held on an ad hoc basis

3. A Close Corporation is regarded as a legal entity/person; this is an advantage because it means that the continuity of a CC is not linked to the status and life of the members. The life of the close corporation is perpetual.

4. The members are not personally liable for the debt of the CC.

5. A Close Corporation can easily be changed into a private company and the members can become shareholders.

Disadvantages of a Close Corporation

1. The maximum number of members are 10, so this could have a negative influence on the growth of the business.

2. A member can be held responsible for debt if they acted carelessly.

There are many different types of ownership and you must always look into your need and what your company has to offer and what is your expectations of the company.