• Business

Starting out in business: going solo or no?

Saturday, 8th June, 2019 10:10pm
Starting out in business: going solo or no?

Anne Phillips is a solicitor with Wolfe & Co, Skibbereen.

There’s lots to keep in mind when starting out in business, be it as a sole trader, a partnership or as a company, says Anne Phillips

 

Sole Trader:

A sole trader operates on his or her own behalf. The tax advantage of trading as a sole trader is that you are taxed only once on the income earned from the business whereas a company will incur tax on any retained profits and a further charge is incurred on the distribution of retained profits. The disadvantage is that when you provide goods or services to the general public you have unlimited liability to all creditors for all sums incurred in the operation of the business and for the defects in the goods or services supplied. Therefore, adequate insurance cover should be in place in advance.

Partnership:  

A partnership exists where any at time two or more people carry on a business venture without forming a Company. Where a partnership exists, the terms of the Partnership Act 1890 will automatically apply. It is therefore recommended that a tailored Partnership Agreement is executed to avoid this situation and clearly set out how the Partnership will be conducted. The advantage of a partnership over a company is that the individual partners are individually taxed and not the partnership.  Again, one of the disadvantages of a partnership is that of unlimited liability.  Additionally as a partner you will liable for the losses which may result of the actions of your co-partners carrying on the partnership business and this includes situations where the co-partners may have defrauded clients of the business.

Company:

A company is to all intents and purposes an individual with its own separate and distinct legal personality from that if its members (Shareholders).  It is liable for its own debts and may be sued by creditors or may itself sue debtors.By far the greater number of companies registered in Ireland are Private Companies Limited by Shares.  

The main advantage is (in the absence of the company being run in a reckless manner) the liability of the shareholder or director for the company’s debts should be limited to the amount of the value of the shares they own in the company and their private assets are protected against the possible financial failure of the company.  Rules on how the company should operate are governed by the Companies Act 2014 and the Constitution of the Company. 

The disadvantages of trading as a company include the cost of incorporation and the continuing cost of complying with statutory regulations. A company is required to file its financial statements with the Registrar of Companies annually and the accounts are available for public inspection on payment of a fee.

 

ON establishing any of the above business models you should register with the appropriate Revenue Commissioners/relevant tax offices and as an employer for PAYE and PRSI payments, if applicable. You should familiarise yourself with your duty to employees under relevant employment legislation and health and safety regulations and be aware of intellectual property rights such as trademarks, copyright and patents which may affect the goods and services you provide.

If you use a business name other than the true name of the individuals, partners or registered Company then you are obliged to register such business name with the Companies Registration Office. The purpose is to make the public aware of the identity of the individuals behind the business name.  You should ascertain what grants are available to you and you should decide the question of the form of ownership of business property on the basis of the most tax effective strategy at the time of setting up your business.

This article is for general information purposes only and does not constitute legal or other professional advice. Anne Phillips is a solicitor with Wolfe & Co, Skibbereen.