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Advantages
of a Close Corporation (CC)
As with all
forms of business
ownership, there are advantages and
disadvantages.
There are a number of
advantages to registering a close corporation and knowing the
advantages and disadvantages of a Close
Corporation will be useful when deciding what
form of
ownership will be best for your business.
The advantages of a CC are:
- Registering
a Close Corporation (CC) is a simple and relatively affordable option.
It is not expensive and there are only a few regulations.
- A
CC does not have any legal complications that a company has. For
example, a CC is not required to have annual financial statements
audited and a CC is not required to hold annual general meetings. This
makes running a CC easier than a company.
- The
CC 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.
- Income
distributed to the members of the CC is exempted from normal income
tax.
- A
CC may give financial assistance to a member to acquire an interest in
the corporation.
- The
amount of capital a CC is able to access is normally more than the
average sole trader or small business.
- Liability
of members for debts is limited except under certain exceptional
circumstances.
- It
is easy and inexpensive to change the Founding Statement of a Close
Corporation.
- There
is no separate board of directors in a CC, management is the
responsibility of the members.
- The
owner’s interest in the CC does not need to be in proportion to their
contributions (Capital). An example of this could be when one member
contributes less capital because they have specific skills that are
needed in the CC.
As
you can see from the above list, there are a number of advantages in
starting or registering a Close
Corporation (CC). In order for you to
make an informed decision in deciding what form of ownership will suit
your needs, it is recommended that you first consider the disadvantages
of a Close Corporation. Only after considering
both the advantages and
disadvantages will you be able to make the right decision.
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