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Thread: Can a CC have a division with members for that division only?

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    Can a CC have a division with members for that division only?

    Apologies for the confusing question, it is in 2 parts.

    I own a CC and I want to go into business with a partner. He will only have "shares/membership status" in the new division but we want to keep the new division as part of the original CC.

    1st Can I open this new company as a division within the existing CC, to keep the admin and returns etc to a minimum?
    2nd How do I satisfy my partner that his profit share would be safe if this were the case?

    Of course this could be completely impossible?

    I appreciate your help.

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    I'm looking forward to some other replies on this as the "Division" concept has always been a bit unclear to me. However here is my take:

    A division can be within a company and is an informal separation of operations within the same business. Usually because the same company makes different unrelated products and so has different groups of staff and equipment focusing on those specific products. Often each division will have its own trading name, but ultimately its one company.

    A whole company could also be a division of a larger company, although a better term here would be a subsidary.

    So to answer your question, this whole "division" thing is an internal splitting of operations. Its not a formal registration process. So your partner can have shares in the new company if the whole division is also a subsidary company. It would be a whole new company itself so would require its own set of returns and admin. The holding company could however provide much of the support services such as accounting and admin.

    I gather that you do not want him to be part of the "mother" company. In which case I suggest you register your new company with your partner and the mother company as shareholders. This gives you both an element of control over the new entity. It can be supported by the mother company for many tasks such as admin, accounts, and logistics. Just agree on the fee for doing this upfront. You can call it a division if you want to, or not.

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    Quote Originally Posted by Camstar View Post
    Apologies for the confusing question, it is in 2 parts.

    I own a CC and I want to go into business with a partner. He will only have "shares/membership status" in the new division but we want to keep the new division as part of the original CC.

    1st Can I open this new company as a division within the existing CC, to keep the admin and returns etc to a minimum?
    2nd How do I satisfy my partner that his profit share would be safe if this were the case?

    Of course this could be completely impossible?

    I appreciate your help.
    Divisions, as Busfact pointed out, are a way of logically splitting large corporations into business entities, whether based on market considerations or product / service nature (or other) considerations. They normally would be capable of "running on their own", as opposed to a branch, which is largely dependent on the resources of the corporation.

    There are certain statutory arrangements that facilitate the concept, like VAT and PAYE where SARS does allow "branch" registrations.

    The problem with your idea is that there is no way to separate or restrict ownership; it's all or nothing basically. Whether it is a cc or a company, shareholders have a beneficial interest in the corporation that issued the security. Branches or divisions are not by themselves incorporated and therefore cannot issue securities.

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    I would recommend forming a new company and agreeing the split in shareholding and whether salaries and bonuses are applicable to the owners. The cost saving in admin does not outweigh the costs involved in unwinding the complexities of a mixed organisation in the event of a dispute.

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