Companies Vs Trusts: Which to choose?

25/10/2023 - By Kelsey Nurse

So, you are thinking about investing in property but can’t decide whether you should start a company or a trust. We have compiled a list of information to help you decide on the best solution for you.

Before deciding whether to register a trust or a company you should consider three important implications of each:

1. Liability – To sue and be sued
2. Tax – Rates and consequences of dividends
3. Administration costs – The running and financial costs


Trusts are governed by the Trust Property Control Act (TPCA)1 which determines the framework by which all trusts function. All the terms and conditions of a specific Trust are set out in a Trust Deed which is registered with the Master of the High Court. In order for Trustees to conduct business on the behalf of the Trust, they require Letters of Authority as issued by the Master of the High Court in their favour. Without these the trustees cannot act on behalf of a Trust.

1. Liability:
Trusts are not viewed as juristic persons as the Trust itself is merely a collection of assets and liabilities and therefor does not have a separate legal personality. This means that a Trust itself cannot sue or be sued. Therefore, a trustee can be sued and sue on behalf of the Trust, in other words you don’t sue a Trust but the trustees of the Trust.

2. Tax:
Trusts are taxed at a much higher rate in terms of Capital Gains when selling properties and this is in the case of any rental income earned by the Trust as well. As of 2020 any profit that is made by a Trust is taxed at 45% and any dividends to beneficiaries are taxed according to their individual income tax bracket.

3. Administration costs:
Unless the registered Trust Deed makes provision for this, Trusts are not required to prepare annual financial statements.


Companies are governed by the Companies Act2 which determines the registration requirements and the framework by which they should function. They are registered at the Companies and Intellectual Properties Commission. The Company’s directors and those authorized to act on behalf of the Company, are determined by the Company’s registration

1. Liability:
A Company is a juristic person and has a separate legal personality therefore the company itself can sue and be sued. The personal estates of the directors are not affected by the running of the company, unless it is determined that they acted male fide on behalf of the Company.

2. Tax:
Company profit is taxed at the rate determined by SARS, which is currently 28%. Any dividends are taxed at a further 20%. Capital Gains Tax is applicable on the sale of property at the rate of 18.6%.

3. Administration costs:
To register and run a Company is relatively inexpensive. Public Companies have to be audited annually but Private Companies only have to be audited if it is deemed to be in public interest and according to regulation 28 of the companies act, only if one of the following is present:

• If such a Company, in the ordinary course of its primary activities, holds assets in a fiduciary capacity for persons who are not related to the Company, and the aggregate value of such assets held at any time during the financial year exceeds R5 million;
• Any other Company whose public interest score in that financial year is 350 or more;
• Any other Company whose public interest score in that financial year is at least 100 (but less than 350) and whose annual financial statements for that year were internally compiled.

Should you wish to arrange a consultation with us to assist with the registration of a Trust or Company, please contact us at or 011 425 4340.

**All tax rates stated in this article are subject to changes affected by South African Revenue Services.**