When you start a business, you must decide on a legal structure for it. Usually you’ll choose either a sole proprietorship, a partnership, a limited liability company (LTD), or a corporation. (Also, some businesses choose to operate as cooperatives.) There’s no right or wrong choice that fits everyone. Your job is to understand how each legal structure works and then pick the one that best meets your needs. The best choice isn’t always obvious. You may, after reading this section, decide to seek some guidance from a lawyer or an accountant or a professional company formation agent, like Irish Company
For many small businesses, the best initial choice is either a sole proprietorship or, if more than one owner is involved, a partnership. Either of these structures makes good sense in a business where personal liability isn’t a big worry — for example, a small service business in which you are unlikely to be sued and for which you won’t be borrowing much money. Sole proprietorships and partnerships are relatively simple and inexpensive to establish and maintain.
Forming and operating a company is more complicated and costly, but it’s worth it for some small businesses. The main feature of LTDs that attracts small businesses is the limit they provide on their owners’ personal liability for business debts and court judgments against the business. Another factor might be income taxes: You can set up an LTD or a corporation in a way that lets you enjoy more favorable tax rates.In certain circumstances, your business may be able to stash away earnings at a relatively low tax rate. In Ireland, corporate tax is only 12.5%. In addition, aLTD may be able to provide a range of fringe benefits to employees (including the owners) and deduct the cost as a business expense.
If your business will have several owners, the LTDis more flexible than other legal forms in the way you can parcel out profits and management duties.
Keep in mind that your initial choice of a business form doesn’t have to be permanent. You can start out as sole proprietorship or partnership and later, if your business grows or the risks of personal liability increase, you can convert your business to an LTD
Ways to Organize Your Business
|Type of Entity||Main Advantages||Main Drawbacks|
|Sole Proprietorship||Simple and inexpensive to create and operate
Owner reports profit or loss on his or her personal tax return
|Owner personally liable for business debts|
|General Partnership||Simple and inexpensive to create and operate
Owners (partners) report their share of profit or loss on their personal tax returns
|Owners (partners) personally liable for business debts|
|Limited Partnership||Limited partners have limited personal liability for business debts as long as they don’t participate in management
General partners can raise cash without involving outside investors in management of business
|General partners personally liable for business debts
More expensive to create than general partnership
Suitable mainly for companies that invest in real estate
|Nonprofit Corporation||Corporation doesn’t pay income taxes
Contributions to charitable corporation are tax deductible
Fringe benefits can be deducted as business expense
|Full tax advantages available only to groups organized for charitable, scientific, educational, literary, or religious purposes
Property transferred to corporation stays there; if corporation ends, property must go to another nonprofit
|Limited Liability Company (LTD)||Owners have limited personal liability for business debts even if they participate in management
Profit and loss can be allocated differently than ownership interests
|More expensive to create than partnership or sole proprietorship|
|Limited Liability Partnership||Mostly of interest to partners in old-line professions such as law, medicine, and accounting
Owners (partners) aren’t personally liable for the malpractice of other partners
Owners report their share of profit or loss on their personal tax returns
|Unlike a limited liability company or a professional limited liability company, owners (partners) remain personally liable for many types of obligations owed to business creditors, lenders, and landlords
Often limited to a short list of professions
We, at Irish Company, could assist you with setting any type of legal structure in Ireland and abroad. Feel free to ask us any questions about our products and services as you explore the sitewww.irishcompany.eu or send us an email to email@example.com with your questions and we will get back to you within 30min!