Along with 2 other partners we are about to set up a food distribution business, each of us will be directors and have equal shareholding. The question we have is two directors who want to have their shares in their family company name and the director want their shares to be just in a business name, not a pty ltd.

Does anyone see this as a problem and does it represent any risks to any of us as directors?

Hi Nathan,

A little confused about your question, which makes me think you and your business colleagues may be a little confused about the business structure.

As a company (Pty Ltd) the shareholders can be either individuals, trusts (trustee name on share certificate) or company. Each shareholder can have their shares owned how they like (for tax, cost or other reasons). Shareholders take no responsibility for the company activities, and their only risk is the value of their investment into the company.

Directors have the risk/liability follow them in limited circumstances, but are generally clear of day-to-day actions of the company. It is the limited scope for liability that makes the company structure appealing to most business operators.

You can also look at trusts as a way to carry on a business, and further/more complicated structures, which may well suit your situation.

You really need to sit down with an accountant that specialises in small/medium business, from start-up to end phase of business. CPA/CA are great places to start, get someone you are comfortable with and ask the questions etc. to make sure you get the right info/advice. Each shareholder can have their own accountant, though having all in one place can be helpful.

And please - make sure you have some agreements set down for succession planning at the start. Things like buying out a party, if one of you dies etc., where we become almost as negative as lawyers :p in our negative thoughts, to cover off unforeseen scenarios.

Good luck!

Todd.