Can a Private company own a CC

[Soundinmind]

Good day everyone,

Im in the process of opening more companies and would like most of them to full under the same group, however they'll have different names. Is it possible for a Private company to own CC? or is there a better way?

I know that a CC cant own another CC and as a member of a CC I cant own more than one CC unless I want to pay heavy taxes.

What can I do???

Here is a list of the business types:
- Distribution (Import/Export)
- 2x Retailer (Sales of products)
- Productions (Event sound hire)

Im going to own other small business in the future, such as a coffee shop but I wont join it with these as its not in the same line.

[Justloadit]

I know that a CC cant own another CC and as a member of a CC I cant own more than one CC unless I want to pay heavy taxes.

If you are a member/partner/director, you do not get special dispensation on tax, so either way you have no choice. It's not that you pay heavy taxes, if you only have one CC and work in it, then there is a reduced tax you pay. You do not get penalized if you have one or more or are involved in one or more business, you then get taxed at the prescribed rate according to earnings.

At one stage Trust could not be share holders in CC,s but this changed recently. I am not sure if this implies to other CCs.

[sterne.law@gmail.com]

no, a company can not be a shareholder in a cc. only natural persons may be shareholders and not juristic persons 9companies, trusts etc0

You can also own as many cc as you want.
However a cc can only have 10 members.

[sterne.law@gmail.com]

A trust itselfcannot be a member of a cc, but a trustee can be a member in his or her role as trustee of a trust.

[Justloadit]

no, a company can not be a shareholder in a cc. only natural persons may be shareholders and not juristic persons 9companies, trusts etc0

You can also own as many cc as you want.
However a cc can only have 10 members.

A trust itselfcannot be a member of a cc, but a trustee can be a member in his or her role as trustee of a trust.

Dear Anthony,

I beg to differ on your statement, as I know there was an ammendment to the bill. I have an extract here from 'Swift registrations" outlining this.

Adding a Trust as a member of a Close Corporation

CIPRO has recently allowed Trusts to be members of Close Corporations provided that:

• The beneficiaries are all natural persons (i.e. not companies)
• The combined number of members plus beneficiaries do not exceed 10


To assist us in registering the Trust as the new member of your CC please supply us with the following documentation:

1. A certified copy of the Letter of Authority issued by the Master of the Court.
2. A certified copy of the section of the Trust Deed identifying who the beneficiaries are.
3. A letter (on the letterhead of the trust) signed by all trustees stating the following:
a. The name, registration number and address of the trust
b. The names of all the trustees
c. The names of all beneficiaries
4. An original letter (signed by all trustees) authorizing one trustee as the representative of the trust for purposes of holding and dealing with the member’s interest in the close corporation.
5. The nominated trustee must sign the attached power of attorney.
6. Please send us via email all the ids, emailed to ids@swiftreg.co.za.

[sterne.law@gmail.com]

Six of one half a dozen of another is the saying I believe. The trustee is the member but by virtue that he represents the trust, in esence the trust is a member.
Importantly - the beneficiaries amy not be juristic persons.

[murdock]

i am trying to understand what you guys mean....

i am sole prop of a company which is registered with vat.

i aslo started and am a working director of a cc which i started a couple of years later which does similar work to the above company... but the cc is not registered with vat as i dont buy materials in the cc...i only charge out labour.

is this legal?

my plan for the furure is to register the cc with vat and take over most of the work (the big comapnies and commercial work which require vat registration) from the sole prop.

the sole prop will carry on operating and do small jobs in the domestic line where people dont want the comapany to be vat registered.

is this a smart move or do you think i am wasting my time and money and should rather just operate one comapany.

let me also put you in the picture as to why i am doing this...

my plan is to build up the cc...and everyone i employ will get shares and become members...then eventually i will sell my shares to other members....or just stay in the company as a silent member

what are your thoughts?

[dcs]

Hi Murdock,

I am trying to understand:

i am sole prop of a company which is registered with vat.

I assume you are trading as a sole prop and are registered for VAT, not as (Pty) Ltd. There should be no problem charging labour to clients from the cc, but then presumably you charge the clients separately for materials (inclusive of VAT)? If you do not, then you must sell the materials inclusive of VAT to the CC. The tax benefit goes to the customer as there will be no VAT on the labour. I suspect that this would be breaking the law as the intention of the cc is to reduce tax (VAT) and the transaction is not at arms length. The way it would be legal is if the sole prop sold the materials to the cc at a profit and paid the VAT. The cc then pays for the materials inclusive of VAT.

The net effect is to remove the VAT charge on labour. I suspect that if this is the primary reason for what you are doing, it is illegal.

Your plan is to register the cc for vat and deregister the sole prop for VAT. I think you are going to hit the same problem until such time as you are no longer a member of the cc or are a minority member of the cc.

I think what you are doing is probably illegal and adds a whole lot of administrative overhead. I reckon you should rather have a chat to your accountant as to the best way forward.

David

[Dave A]

is this legal?

I'm inclined to agree with David - SARS might well see it as avoidance.

My thoughts are I'd rather have the cc than the sole prop. (which is effectively you in your personal capacity) registered for VAT and would divide activities to suit. You'll also need a presentable reason as to why the operations are split across seperate legal entities, particularly if one is registered for VAT and the other isn't. The easiest defence is different ownership interests...

You should probably also take a close look at whether having two companies is actually worth it as you could end up missing out on some fairly substantial small business tax breaks. Unfortunately to qualify for them all owners/members must be natural persons (ie not companies or trusts) and may only have a significant shareholding/interest in just that one business.

[Dave A]

Well, it looks like the company owning the cc question is answered - still can't happen. I wasn't sure on that one.

I think the change allowing trusts to hold an interest in cc's came about through BEE issues.