Advantages of a close corporation include the following:

* It is easy and inexpensive to form.

* It is a simple and flexible corporate entity. The management and decision making requirements are simple and informal. The members own and manage the corporation; they are not obliged to hold annual general meetings and there are no special requirements for resolutions.

* It provides perpetual succession, which means that the corporation continues to exist when the membership changes.

* It provides limited liability. The liability of the members in respect of their business dealings is limited to what they have contributed to the close corporation.

* It provides the advantages of a corporate entity without having to comply with the many legal requirements and administrative formalities and constraints that apply to companies. It is a less expensive, simpler and more flexible form of corporate entity than a company.

* It is subject to simpler financial reporting requirements, for example, the financial statements do not have to be audited and do not have to contain a director's report.

* The corporation is allowed to acquire the interest of a member and may assist members financially to acquire an interest in the corporation.

* Fellow members can protect the interests of minority members in the event of unfair treatment.

* The liquidation of the corporation does not result in the sequestration of the members' personal estates.

* A corporation may be converted to a company without affecting its rights, obligations or tax status; the legal person that existed prior to the conversion continues to exist in the form of a company.

* The Close Corporations Act relies more on self-regulation than offences to ensure compliance than in the case of the Companies Act.

* Corporations are not required to maintain contributed capital as is the case with companies who have numerous rules regarding the maintenance of share capital; the members must ensure solvency and liquidity before altering the contributed capital.

* A corporation can hold shares in a company and can become the holding corporation in a group of companies.

Disadvantages of a corporation include:

* A corporation may not have more than ten members. This may limit the corporation's growth.

* The members must be natural persons. Companies, corporations and inter vivos trusts may not become members. This limits the usefulness of corporations in group structures and estate planning.

* The members who own and manage the corporation are referred to simply as members and there are no familiar business titles such as shareholder, director, managing director and chairman of the board; there may therefore be a perceived lack of status.

* Although a corporation provides limited liability, there are a number of instances in which the members become personally liable for the corporation's debts.

* A corporation cannot raise capital from the investing public by issuing shares or debentures.

* The interest of a member in a corporation must be a single interest and cannot be held jointly by two or more persons.

* When a corporation acquires immovable property, a higher rate of transfer duty is payable than in the case of natural persons.