Sole Proprietorship

A shop, a tailor, a small delivery outfit, a one person consultancy. The owner registers a business name at the CAC, opens a corporate account in that name, and trades.

It is fast, cheap and light on compliance. There are no shareholders, no directors, no board resolutions and no share capital to declare. Annual returns are still required, and the tax obligation sits with the owner personally rather than with a separate company.

Business name registration is the format the CAC and SMEDAN free registration drive covered, aimed at formalising 250,000 previously unregistered micro businesses. Limited liability companies were never part of that scheme.

Most owners eventually hit one of three walls. A corporate client that will only contract with a limited company, an investor who wants shares, or a liability that suddenly makes personal exposure feel very real. Any of those is the signal to incorporate.

A sole proprietorship is cheap, quick and simple, and it leaves the owner personally exposed to every debt and claim.

A limited company costs more and carries more obligations, and it creates a separate legal person that owns its own assets and owes its own debts. It also continues beyond its founder and can issue shares.

The test is not size or ambition, it is exposure. If a single bad contract could produce a debt large enough to reach your house or your savings, the company structure is worth what it costs.

Unlimited personal liability is the defining limitation. Creditors of the business can pursue the owner's personal assets.

It is also hard to raise money into, because there are no shares to sell, and it has no continuity. When the owner dies, the business has no separate existence to pass on, only assets that form part of their estate.