I am frequetly asked about the ways a person can operate a business in Ireland. T here are a number of legal forms of business organisation that a business person can adopt and principally these are as follows;
1. Sole Trader
3. Industrial and Provident Society
4. Building Society
5. Credit Union
6. Unincorporated Associations
7. Friendly Societies
8. Unregistered Companies
10. Private Companies
The vast majority of business people choose to adopt either the Sole Trader route, or the Company route. A Sole Trader generally is a person engaged in a trade, profession, or business, on their own account, such as farmers, tradesmen, small retail outlets, and professionals working on their own account. There may be restrictions in law against incorporation for professionals, but other such business people have no such restrictions. A Sole Trader is a person trading under a business name other than their own name, and they must register the business name pursuant to the Registration of Business Names Act, 1963. The advantages of carrying on the business as a Sole Trader generally are viewed under the headings of compliance and management. There are no Annual Returns to be filed, and the business cannot be struck off any Register, and the Sole Trader has complete control over his business, and can make decisions without regard to anybody else. Most importantly, when the business makes a profit, the profit belongs alone to the Sole Trader. There is also the insurance of confidentiality for the Sole Trader, as he does not have to disclose his accounts other than to the Revenue Commissioners. He also avoids the start up costs of the formation of a Company.
The disadvantages to acting as a Sole Trader however are noteworthy. The Sole Trader is liable for all the debts of his business, and that liability is unlimited. Just as he gets to keep all the profits, he gets to keep all the debts too, and if his debts become more than his assets, he may be faced with personal insolvency. He may also have difficulty in obtaining finance from the Banks, it might be more difficult to dispose of his Company when it comes closer to retirement time, and finally, the Revenue Commissioners grant less in the way of perks to Sole Traders.
Sole Traders can also enter into business with one or more partners, as a Partnership pursuant to the Partnership Act 1890, and business people must be very careful that they do not establish a Partnership by accident. The definition under Section 1 of the Act is “the relationship which subsists between persons carrying on business in common with a view to profit”. The Partnership doesn’t need to be registered anywhere, but all that is required is two or more business people carrying on a business with a view to profiting. The Partnership itself is not a separate legal entity like a Company would be, and the partners can be sued for the debts, and remain, like Sole Traders, personally liable for the debts. Under the definition above, the minimum number of partners can be two, and pursuant to law, the maximum number of partners can be twenty. However, this upper limit is imposed by virtue of the 1963 Companies Act, and that does not apply to Banking Partnerships, Solicitors, Accountants, and Horse-Breeders.
The law in relation to Co-Ops, Building Societies, Credit Unions and Friendly Societies is very specialised, and I don’t propose going into that in detail now. Please do contact me if you would like to learn more about those.
In the next article, I will go into the types of Companies most common in Ireland, and if you require further information, or specialised advice, i will be happy to assist.