About Companies

Advantages of Companies
Some advantages of companies include:

  1. Limited Liability (Ltd). The concept of Limited Liability means that the liability of the shareholders in the company is limited in the event of a winding up or liquidation of the amount still owing on their shares. If you have taken out $1000 worth of shares in a company and $500 is still as yet unpaid then in the event of a winding up or liquidation of the operations the liability is limited to the amount still unpaid on the shares which would be $500.

  2. The continuity of the business is not affected by the death or bankruptcy of its members

  3. Shares can be easily transferred or gifted with very little cost

  4. Provisions have been enacted to allow the transfer of tax losses between companies

  5. The government has introduced a full imputation system for dividends distributed to shareholders.

  6. It is easier to arrange borrowing from banks and lending institutions through a company by offering a charge over the assets of the company by way of a debenture etc.

  7. The company structure is an excellent “tax planners tool” allowing your tax adviser to arrange your affairs in such a way that the maximum tax benefits are obtained.

Disadvantages of Companies

Some disadvantages of a company are:

  1. Inflexible nature. The degree of flexibility is dependent on how the company was formed.

  2. Formality. The Companies Act requires a high degree of formality and the requirements and standards that a company has to fulfil are always rising.

  3. High Taxation. A company as a separate legal entity pays tax on it profits at a flat rate of 33 cents in the $.

  4. Cost. A company structure is considerably more expensive to set up and operate especially in the light of ever increasing company filing fees.