The structure you trade through determines who is liable for the debts, how you are taxed, whether you can bring in partners, and whether the business can ever be sold. Most people default to trading as themselves because it requires no decision, and then discover the consequences when they need finance, a corporate contract, or protection from a claim.
Four structures, and the questions that decide between them.
Sole proprietor: simplest, and fully exposed
You and the business are the same legal person. There is nothing to register, income is taxed in your hands at personal rates, and you are personally liable for everything the business owes.
It suits testing an idea or a small side activity. It does not suit anything with meaningful liability, employees, or a plan to sell, because there is no entity to transfer.
Partnership: shared, and jointly liable
Two or more people trading together without forming a company. Simple to start and the reason most partnerships end badly is that partners are generally jointly and severally liable, meaning one partner’s commitment can bind the others.
If you are going this route, a written agreement covering contributions, decisions, exit and valuation is essential. Most serious disputes are about things a partnership agreement would have settled in an afternoon.
Private company: separate, and sellable
A registered company is a separate legal person that owns its own assets, carries its own debts, survives changes in ownership and can be sold. Registration is inexpensive through the Companies and Intellectual Property Commission.
The trade is ongoing obligations: annual returns, separate tax returns and proper records. And limited liability is undone by personal surety, which banks and landlords routinely require, so read what you sign.
Co-operative, and how to choose
A co-operative is member-owned and governed democratically, with a minimum number of members and its own constitution. It suits a genuine group enterprise rather than a business with one driving owner.
Choose on four questions: how much personal liability you can accept, whether you will employ people, whether you need corporate contracts or funding, and whether you intend to sell. Any yes to the last three points to a company. Small business tax regimes including turnover tax may apply, so confirm your position with the South African Revenue Service.
Frequently asked questions
What is the simplest structure?
A sole proprietorship, which needs no registration. You and the business are the same person, so you carry all the liability.
Why are partnerships risky?
Partners are generally jointly and severally liable, so one partner’s commitment can bind the others. A written agreement is essential.
When should I register a company?
When you will employ people, need corporate contracts or funding, carry meaningful liability, or intend to sell the business.
Does a company fully protect my assets?
No. Personal surety, routinely required by banks and landlords, puts your assets behind the obligation regardless of structure.
What are the ongoing costs of a company?
Annual returns, separate tax returns and proper records, against the benefit of separation, credibility and being sellable.
Further reading
Originally published in January 2018. Updated September 2026 into guidance on choosing the right business structure.
