What exactly is a company? And what makes it different from a business name (sole proprietorship)? Before you start your business, it is important to contemplate the formation of your company. There are a number of misconceptions around the difference between a company and a sole proprietorship.
If you are not familiar with what these kinds of companies are, I will discuss them in this article. My goal is to help you understand the differences and know what to expect from your company secretary.
Please note: This applies to all industries and sectors in Botswana as per The Companies Act (CAP 42:01) and Registration of Business Names Act (CAP 42:05) implemented by Companies and Intellectual Property Authority (CIPA), in Botswana.
What is a Business Name?
CIPA classifies a business name as a sole proprietor registration. The term “sole proprietorship” refers to a kind of business that is owned and controlled by an individual, a company, or a limited liability partnership. There are no partners in the business. It is not a separate entity under the law of Botswana. A sole proprietor can be an individual or a company subsidiary (business trade name) and you (shareholder) assume all the responsibility and liabilities related to the business liabilities.
Strengths of a Business Name
- No company secretary is required unless owned by a company
- Cheaper registration compared to a company
- Annual returns are paid every three years
Weaknesses of a Business Name
- It is not a separate legal entity from the owner
- No liability protection (No limited liability)
- It is challenging to raise capital
- Not continuity in the business
- It is harder to sell your business
Uses of a business name
- For establishing a trading name
- To extend business operations
- To test a product or concept in the market
What is a Private Company?
A private company is a legal entity under Botswana law and has a maximum of twenty-five (25) shareholders. This type of company does not make any offer to the public to subscribe to its shares or debentures. The name of a private company ends with (Proprietary) Limited, e.g. AB Transport Services (Proprietary) Limited.
Strengths of Private companies
- Private companies have limited liability.
- The company can add business names under it (as trading names)
Weaknesses of Private companies
- Require a company secretary, therefore, have higher setup costs
- Higher annual fees than business names
- Annual returns paid annually (more frequently than business names)
There are other ways and factors you can use to compare a business name and company registration, and so I have not exhausted the differences in this post. Even so, the following example is to give an idea of the basic structure implications of both.
Mr. Thamiso Lefelo has registered a business called Lefelo enterprises. After the birth of his first-born child, he decides to create a legacy for his sons with his business. Let us consider these two scenarios in the case of a business name and a company.
Business name scenario
Lefelo and their sons cannot add a trading name under it. Mr. Lefelo would have to register another business name if he wants to create another business called Lefelo & sons.
Mr. Lefelo can add a business name (Lefelo and sons) under Lefelo enterprises. Therefore, Lefelo and sons is legally Lefelo Enterprises (Pty) Ltd trading as Lefelo and Sons.
Choosing a Company Secretary
A company secretary advises board members of their statutory responsibilities to ensure that the company and its directors operate within the law. Choosing a company secretary is up to you but ensure that they are licensed and equipped to help your venture to succeed.
A company register must be licensed by a body recognized by CIPA in Botswana. A company secretary operating in Botswana must demonstrate through a practicing license to be one of the following:
- A legal practitioner
- A member of the Botswana Institute of Accountants
- A member of the Southern African Institute of Chartered Secretaries and Administrators
- A member of the Association of Business Consultants of Botswana
- A member of the Botswana Association of Company Secretaries
There is a stark difference between a business name and a company when it comes to registration. The two have their uses as well as their strengths and weaknesses. With this information, you are equipped to register your business appropriately. Learn how to register a private company or business in Botswana.
If you are want to register a business or need to know more, we are available to guide you through the process and help you structure your business for success and growth.
Contact us by email or contact us.