Business Structure
Which to Choose?
When you start a business, you must choose an ownership structure. You need to choose the structure that best meets your needs. In making your decision, you should take into account the potential risks and liabilities of your business, the time and costs involved in establishing and maintaining the structure and the tax implications of each option.
- Sole Trader
Once you set up a business, you become a sole trader by default. There is little legal formality. Registering a name with the Companies Registration Office is optional. Aside from making normal tax returns, a sole trader is not required to register accounts, thus providing him/her with some confidentiality. The business income is personal income and many business expenses can be offset against it for tax purposes. The downside is that you have no protection if your business fails as all your assets become available to pay off your creditors.
- Partnership
This is an agreement between two or more people to go into business together. It is important from the outset to have in place an agreement between all partners outlining the obligations of each partner.
- Private Limited Company
This is a legal entity separate from its shareholders. The shareholders are only liable, in the event of the business becoming unable to pay its debts, for any amount outstanding on the share capital they subscribe. On the downside, the need to adhere to Companies Act legislation can be costly and time consuming.
Please seek professional advice from an accountant or solicitor when choosing a legal structure for your business.
