Looking to start a new business? One of the important decisions that you will have to make is the choice of legal structure for your business. When structuring your business, you have various options available to you. What follows is the second part in our blog series guideline to help you in choosing the best legal structure for your new business. Before you make any final decision, however, we advise that you consult a legal professional.
In our first post, we looked the legal structures of sole proprietorship and partnership and provided some considerations to help you decide whether either would be the best legal structure for your new business. In this post we look at the private company and personal liability company.
Would you like to own and run your business by yourself? Would you like to own and run your business alongside others? With a private company, you may have between 1 and 50 members. That means either is an option, there is flexibility in choosing between these options. The private company is adaptable to both small and medium to large businesses and can adapt as the business grows.
Do you want your business to have continuity, so that it can carry on regardless of any change in ownership or death of any owner? In a private company, the life of the business is perpetual, it continues uninterrupted as shareholders change.
Do you wish to be protected from the liabilities of the company? A private company is a separate legal entity with its own debts and other liabilities. Shareholders in a private company have limited liability, which means that they are generally not responsible for the liabilities of the company.
Are you willing to put in more time and money to set up and run your business for the additional benefits? Setting up a private company is more difficult and expensive to establish and operate than some other legal structures such as sole proprietorship and partnership. Also note that there are many legal requirements regarding public companies. However, these disadvantages are the tradeoffs to the advantages laid out above.
Personal liability companies
In a personal liability company, the company’s directors, both past and present are jointly and severally liable together with the company for any debts that incurred during their respective terms of office.
When would I choose to use a personal liability company? This type of company is used mainly by professionals such as doctors, lawyers, engineers or accountants.
If you are starting a new business, and would like more information regarding what the best legal structure for your new business would be, please do not hesitate to contact us at [email protected].