Answer to Question #219249 in Law for QILA

Question

Zingapi wishes to start her own catering business. Her friend Conty registered a close corporation in 2007 and wishes to sell the business. Zingapi is unsure whether she should register a company or buy Conty’s close corporation. Advise Zingapi of the advantages of the close corporation as a business form. (5)

Answer 1

If you open your catering business as a close corporation you will enjoy the following benefits:

• You will require fewer formalities than standard corporations.
• The shareholders have a great degree of control over sales of shares to outsiders.
• Liability protection for shareholders is strong.
• Corporate liability protection requires the faithful observance of corporate formalities.
• Fewer formalities means that the corporation is far less likely to misstep in following those formalities.