Legal and Regulatory Requirements of Proprietary and Public Companies

This report examines the legal and regulatory frameworks governing proprietary limited and public companies. It highlights the key differences in formation, membership, and director requirements. The report details the impact of these structures on taxation, emphasizing how proprietary limited companies are often treated as pass-through entities, while public companies are taxed separately from their shareholders. It also discusses the importance of compliance with relevant laws, including the 2013 limited liability act, and the role of regulatory bodies like the USA Securities and Exchange Commission in ensuring financial transparency for public companies. The analysis covers shareholder rights, decision-making processes, and the disclosure requirements for both types of business entities, providing a comprehensive overview of the legal considerations for establishing and maintaining these company structures.

Legal and regulatory requirements of establishing and maintaining a proprietary limited and a
public company
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Business operations are governed by rules and regulations of a given state. In order to run
business successfully, they have to be registered according to the form of business it would take.
A business can be registered as either proprietary limited or a public limited company. Each
business registration is governed by various rules and regulation which must be followed during
operations. These rules and regulations are formulated in order to help in defining the size and
operation of business so that tax is filled accordingly (Campbell & Campbell, 2009). The
structure of business chosen have different impact when subject registered organization is either
sued, when filing tax return and its ability to raise money in various events.
In a proprietary limited company, it should be formed by at least one member and a
maximum of 50 members. Once registered as a proprietary company, its membership must fall
within that range in order to be able to file returns within stipulated business category. In terms
of directors, there should be at least one director who serves from within a given member state.
The business is same as business and business liability is set out to be owner’s liability
(Banhegyi, 2009). It is not organized for profit generation rather than a liability to its members.
According to 2013 limited liability act, all shareholders may owe a proprietary limited company
some form of liability. Within confines of law, a limited company may expand to under provided
laws while discharging its services as required by law. In USA and for taxation purposes, limited
proprietary company is regarded as just a pass- through subject and business owner may be
required to report to the company as loss or an income. By following a state law, a proprietary
company may decide to be taxed as an established public company. This is only applicable if the
subject company fills form 8832 and it request to be treated as a regular limited company
(Kinsky, 2012).

On the other hand, public company must have at least one shareholder but no
membership limit. The number of directors in a public company is limited to three. On tax
obligation, the business is quite different from its owners (Eisenberg & Nelson, 2002).
According to regulation set out to govern its operations, public company should be able to pay its
taxes on its own without affecting members’ property ownership. These form of business are
formally recognized by law as self-sustaining so that it complies with tax obligation as a
company and when its shareholders share their dividends. Similarly, on a public company, it is
clearly stipulated in the law to report to its shareholders all decisions and laws amendments for
approval. Mainly, decision approval is done through voting with their dollar value by either
bidding company’s premium valuation or underrating its value below its required value. In this
case, the operation stringent law requirements are usually set by both USA Securities and
Exchange Commission (Kinsky, 2012). It requires public Company financial statement
disclosure as well as form 10k which discusses the financial state of the company.
References
Banhegyi, S. (2009). Business management. Cape Town: Pearson Prentice Hall South Africa.
Campbell, D., & Campbell, C. T. (2009). Legal aspects of doing business in Asia and the
Pacific. Salzburg, Austria: Yorkhill Law Publishing.
Eisenberg, R. S., & Nelson, R. R. (2002). Public vs. proprietary science: a fruitful tension?
Academic Medicine, 77(12, Part 2), 1392-1399.
Kinsky, R. (2012). Teach Yourself About Shares: A Self-Help Guide to Success on the
Sharemarket. Hoboken: John Wiley & Sons.