Define Your Business Format from the Beginning
The first decision required is the legal format that the business should take.
We advise our new clients about the best company formation structure for their new venture.
There are three main choices for your company format: –
- Sole Trader
- Partnerships
- Incorporated Company
Sole Trader
An individual carrying on a business or profession with a view to profit on his/her own account.
Partnership
The Partnership format is defined as “the relationship, which subsists between persons carrying on a business in common with a view to profit.”
It is not a separate legal entity.
There are two types: –
Ordinary Partnership governed by the Partnership Act. Joint and several liability for all the partners.
Limited Partnership governed by the Limited Partnership Act.
Liability of a Limited Partner is limited to a pre-determined limit.
Ordinary Partners would have joint and several liability.
Incorporated Company
It is usually incorporated by registration.
It is a separate legal entity.
There are three types of registered company format: –
Unlimited company: It has no restriction on the liability of its members so it is rarely used.
Company limited by guarantee: The members’ liability is limited to the amount of their guarantee.
This type of company is generally used for professional and trade associations and charitable purposes.
Company limited by shares: The members’ liability is limited to any amount unpaid on their shares.
It is the form used for most business purposes.
