A private company is treated by law as a separate legal entity and must also register as a taxpayer in its own right. It has a life separate from its owners with rights and duties of its own. The owners of a private company are the shareholders. The managers of a private company may or may not be shareholders. Under the current Companies Act, private companies are no longer limited to 50 members.
|Some advantages||Some disadvantages|
|Life of the business is perpetual, that is, it continues uninterrupted as shareholders change.||Subject to many legal requirements.|
|Shareholders have limited liability, that is, they are generally not responsible for the liabilities of the company. However, certain tax liabilities do exist. One such liability is where an employer or vendor is a company, every shareholder and director who controls or is regularly involved in the management of the company’s overall financial affairs shall be personally liable for the employees’ tax, value-added tax, additional tax, penalty or interest for which the company is liable, that is, where the taxes have not been paid to SARS within the prescribed period||More difficult and expensive to establish and operate than other forms of ownership such as a sole proprietorship or partnership|
|Personal liability on directors.|
The Companies Act 71 of 2008 imposes personal liability on directors where in common law, such liability may not exist or be difficult to prove. Any person, not only a director, who is knowingly a party to the carrying on of a business in a reckless (gross carelessness or gross negligence) or fraudulent manner can be personally held liable for all or any of the debts of the private company.
|Transfer of ownership is easy.|||
|Efficiency of management is maintained.|||
|Easier to raise capital and to expand.|||
|Adaptable to both small and medium to large business|||