Launching your own business can be one of the most exciting and rewarding steps you ever take. But it takes hard work and commitment to make a success of it. And there’s plenty to think about just getting a new venture off the ground.
Some of the more obvious points include having an idea for a business in the first place, doing your research to understand the market you want to enter, and then having a clear plan for how you will make it viable.
There are also legal and financial considerations. If you are new to the world of business, these can be the hardest to get to grips with, and where you can likely benefit most from seeking out professional business advice.
At Xeinadin, we offer a dedicated business start-up advisory service that’s designed to help you navigate the technicalities of launching a business, as well as supporting you to get off to the best possible start.
In this series of blog posts, we’re going to look at three key steps in setting up a new business that you will benefit from taking advice on, starting with choosing a legal structure for your new venture.
Choosing a legal structure for your startup business
The legal structure of a business defines its relationship with regulatory authorities. In particular, the legal structure you choose will affect how you pay taxes, which we’ll cover in more detail in our next blog. It also impacts your liability as a business owner for any debts your business accrues.
For business start-ups, there are four main legal structures to choose from:
Sole trader
This means you are self-employed and take sole legal responsibility for running your business. The easiest type of business to set up, all you have to do legally is register as self-employed with Revenue, although if you want to trade under a business name, you have to register it with the Companies Registration Office (CRO).
There isn’t, however, any need to register as a director or shareholder. One thing to consider as a sole trader is that you’re personally liable for all debts your business takes on, which means if you default, your personal assets could be forfeited.
Partnership
This structure involves two or more people, up to a maximum of 20, running a business together. It’s a popular structure for family businesses. As with sole trader status, there is no legal distinction between the partners and the business – the business’s liabilities are the partner’s liabilities, and they are equally responsible for them.
People operating in a partnership have to register as self-employed for tax purposes. There is no need to formally register anything other than the business name with the CRO, and there is no obligation to submit accounts. Partners do have to draw up and operate according to an agreed partnership agreement, however.
As an alternative, you can choose to set up a limited liability partnership (LLP), which limits the personal liability of one or more of the partners. This is popular in the legal industry, as it also provides professional indemnity for anything other than individual practice. So for example, if a firm of solicitors gets sued by a client, not all partners are liable in an LLP, only those who worked with that client.
Private Company Limited By Shares
Also known as a ‘Limited Liability Company’, this structure treats the business as a separate legal entity from its owners. A key advantage of this is that you are not personally liable for your business’s debts. Instead, one or more ‘members’ take shares in the business. If it ever defaults on its debts, each member is liable only for any amount outstanding on their share capital.
The flipside of this legal protection is that private companies have to be incorporated, which is a much more detailed registration process with the CRO. Directors must be appointed, and they take on a range of legal responsibilities, including filing accounts and annual reports each year.
Speak to an expert
Our dedicated business start-up advisory service team are here to provide advice and guide you on your business journey. Complete the form below and they’ll arrange a meeting with you.
