Formalities

Choosing and registering a legal structure for your business: Limited Liability Company

Some limited companies are limited by guarantee – the guarantee being the amount that the members agree to pay in the event of the company going into liquidation. This form of company is more suitable for clubs and associations than for trading businesses.

The advantages of a limited liability company over a sole trader or partnership are:

• Limited liability status
• The possibility of obtaining credit more easily
• The only income taxable on the owners of the business is any salaries or dividends taken from the business
• Business Expansion Scheme relief for a qualifying company (to end 2001 only)
• Scope for tax planning.

The disadvantages of a limited liability company include:

• The cost of formation expenses (though these were significantly reduced in September 1997)
• The requirement for an annual audit (not required for companies limited by shares where turnover is under €317,000, the balance sheet total is under €1.9 million and there are less than 50 employees)
• The public filing of information with the Companies Registration Office
• The need for accounts to comply with Companies Acts and auditing and accounting standards
• Business losses may not be set against personal income
• Possibility of further taxation on capital gains if appreciating assets are withdrawn from the business.

EU regulations now allow the formation of private limited companies with only one member (as against the previous requirement for two members), although two directors are still required.

Registration and other forms are available for download from the Companies Registration Office web-site (www.cro.ie).

Now consider the other legal structures that you can adopt for your business:

• Sole Trader
• Partnership
• Co-operative.

Alternatively, move on to consider the other aspects of formalities:

• Choosing and registering a name for your business
• Registering for taxation
• Setting up accounting systems
• Ensuring that your business meets all applicable legislation and regulations
• Ensuring that your business meets all appropriate quality standards
• Opening a bank account
• Arranging for appropriate insurance
• Protecting your business' intellectual property.

It's back!

HOW TO FORM A LIMITED COMPANY - now in a PDF eBook edition