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    Sole Trader vs (Pty) Ltd vs Close Corporation

    Last updated 21 Jun 2026Reviewed 21 Jun 2026

    Most South African tradies start as a sole proprietor and register a private company (a Pty Ltd) only once profits are consistent, they want to bid tenders, or they need to protect personal assets. The close corporation (CC) is the third structure you will still hear about, but you cannot start a new one: since the Companies Act 71 of 2008 took effect on 1 May 2011 the Registrar stopped registering CCs. Existing CCs may carry on indefinitely, so you can buy or inherit one, but for anyone setting up today the real choice is sole prop or Pty Ltd.

    The table below compares the three on the points that matter to a trade business: who carries the debt, how the profit is taxed, what CIPC registration involves, the running admin, raising finance, and whether you can register for government tenders. This is editorial guidance, not financial or legal advice. SiteKiln takes no referral fees from any registration service.

    At a glance

    Option Liability for debts Tax treatment CIPC registration Admin and cost Raising finance Can register for tenders
    Sole proprietor Unlimited personal Personal 18% to 45% Lowest Hardest Lower grades only
    Private company (Pty) Ltd Limited to the company 27% company + 20% dividends R125 to R175 Highest Easiest All grades
    Close corporation (CC) Limited to the CC 27% company + 20% dividends Existing only, none new Medium Moderate All grades

    Compared in detail

    Sole proprietor

    Best for: Starting out, low turnover, private work

    Pros

    • No CIPC registration and no setup cost, trade immediately
    • Profit taxed on the personal scale (18% to 45%), better than 27% at low profit
    • Simplest admin: one personal tax return, no annual CIPC filings
    • Can prove B-BBEE status with a sworn affidavit if turnover is under R3 million

    Cons

    • No liability shield: every business debt is your personal debt
    • Harder to raise finance or take on a partner
    • CIDB Grade 4 and up effectively needs a company with audited financials

    Private company (Pty) Ltd

    Best for: Tenders, employing staff, asset protection

    Pros

    • Separate legal person: company debts are not your personal debts
    • Flat 27% company tax, plus the Small Business Corporation rates if you qualify (0% band at the bottom)
    • Expected for serious tenders and for CIDB Grade 4 and above
    • Can take on shareholders and is easier to raise finance against

    Cons

    • Costs R125 to R175 to register on BizPortal
    • Extracting all profit as dividends costs about 41.6% combined (27% then 20% dividends tax)
    • Ongoing admin: an MOI, annual returns and CIPC filings; deregistration freezes the bank account

    Close corporation (CC)

    Best for: Only an existing CC you already own

    Pros

    • Separate legal person with a liability shield, like a Pty Ltd
    • Slightly simpler than a company (members, not a full board and MOI)
    • An existing CC may continue indefinitely; can still register for tenders

    Cons

    • You cannot register a NEW one: closed to new registrations since 1 May 2011
    • Still owes CIPC annual returns and accounting records
    • A Pty Ltd is the modern equivalent, so there is rarely a reason to acquire a CC

    Our pick

    Our pick for most tradies starting out: a sole proprietor. It is free, you trade immediately, and your profit is taxed on the personal sliding scale of 18% to 45%, which beats the flat 27% company rate until profit is consistently strong. The catch is that there is no liability shield, so a bad job or an unpaid supplier is your personal debt.

    It depends on three things. Move to a Pty Ltd when (1) you want liability protection because the work carries genuine site risk, (2) you are bidding tenders or employing several people, or (3) profit is consistently above roughly R200,000 to R300,000 and you can use the Small Business Corporation rates or a salary-and-dividend mix to beat the personal scale. Remember that pulling all the profit out of a company as dividends costs about 41.6% combined (27% company tax, then 20% dividends tax on what is left), so a Pty Ltd is a planning decision, not an automatic upgrade.

    Do not register a new CC: you legally cannot. Only consider buying an existing CC if there is a specific reason, and take advice first, because a Pty Ltd is the modern default and gives the same liability protection.

    SiteKiln does not receive referral fees, affiliate commission or kickbacks from any provider listed. This is editorial content. If a better option exists, tell us at hello@kilnguides.co.uk.

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