If you have decided to start your own business, you should meet with a lawyer to determine what structure or organization best suits your needs. This will depend on the type of business you choose to run and the ownership structure you desire. The three most common business types are: (i) sole proprietorship, (ii) partnership, and (iii) incorporation.
This type of organization is the easiest and most inexpensive to form, requiring registration of a business name. If you need assistance registering your business name, please contact us.
There is also a low regulatory burden to maintain a sole proprietorship and as a sole proprietor you will have direct control over all decision making. Sole proprietorships are not, however, protected from personal liability. If there is a business debt, your personal assets are exposed and can be used to pay it off. As a result, a sole proprietorship may not be the best option for you and should only be undertaken after consultation with a lawyer to understand your rights and risks.
When two or more persons carry on business together with a view to profit, and they haven’t incorporated, the relationship is called a partnership. A partnership may be a beneficial structure if you wish to carry on business with a partner(s), but do not want to incorporate.
It is important to know that the terms of your relationship with your partner(s) will be imposed upon you by statute if you do not enter into a formal partnership agreement. Daniel & Partners LLP can assist you in drafting a partnership agreement clearly setting out the arrangement between you and your partner(s) with respect to profit sharing or dissolution of the partnership.
Similar to a sole proprietorship, there is unlimited personal liability in a partnership, and so you could be held personally liable for the debts incurred on behalf of the partnership by your partner(s). As a result, it is important that you consult with a lawyer before embarking upon a partnership.
A noteworthy characteristic of corporations is that they are separate legal entities from the owners of the business. This means that the personal assets of the owners of the corporation are protected from the corporation’s creditors. Daniel & Partners LLP can assist you with incorporating your business and with the creation of a shareholder’s agreement setting out the terms of your relationship with the other shareholders.
For more information on business planning, do not hesitate to contact one of the Corporate and Commercial Law specialists at Daniel and Partners LLP.
Article written by Matteson DeLuca, summer student