Limited liability? Is your liability really limited?
Maybe, maybe not.
This piece will look at how to set up a limited company in Ireland and look at what are the advantages and disadvantages of setting up a company.
Setting Up a Company
To form a company, also known as setting up a company or incorporating a company, you will need to submit the following documents, along with the registration fee, to the companies registration office:
1. Memorandum of association
2. Articles of association
3. Form A1
To carry out your company set up you can download the forms above from the companies registration office website at CRO.ie.
Memorandum of association
Your company set up will involve whats called a memorandum of association. This memorandum of association sets out the conditions upon which the company is granted incorporation. It must contain provisions dealing with certain matters e.g. the name and objects of the company and, if it is a company with limited liability, that fact must also be stated.
The memorandum of association must be in accordance with, or as near as circumstances permit, to the appropriate table in the First Schedule to the Companies Act 1963. It must be printed and divided into paragraphs and numbered consecutively.
Types of company
To set up a company in Ireland you must decide first which is the most appropriate type of company for your enterprise-
1. Private company limited by shares Table B
2. Company limited by guarantee and not having a share capital Table C
3. Company limited by guarantee and having a share capital Table D
4. Unlimited company Table E
5. Public limited company Second Schedule of Companies (Amendment) Act 1983
Articles of association
Your company set up will also require the use of articles of association. The articles of association is a document which sets out the rules under which the company proposes to regulate its affairs.
Articles of association are required to be registered by a company limited by guarantee and having a share capital or an unlimited company. Articles of association must be printed and divided into paragraphs and numbered consecutively.
A company limited by shares or a guarantee company not having a share capital may register articles of association with the CRO. Model form articles of association are set out in the First Schedule to the Companies Act 1963.
Samples of memorandums and articles may be obtained from legal stationers, accountants, solicitors or company formation agent.
Form A1 requires you to give details of the company name, its registered office, details of secretary and directors, their consent to acting as such, the subscribers and details of their shares. It incorporates a statutory declaration that the requirements of the Companies Acts have been complied with, and as to the activity which the company is being formed to engage in.
Applications for company set up can be submitted under any one of three schemes, each of which has a different customer service standard:
Ordinary: while there is no guaranteed service level, in practice it takes 15 working days.
Fé Phrainn: ten working days
Companies Registration Office Disk: five working days
Documents are processed in chronological order and are subject to checks. Documents returned for correction are processed according to their date of re-submission to the companies registration office.
Statutory declarations sworn abroad will often require further legalisation.
Company set up in Ireland is a relatively straight forward process. The companies registration office are helpful and they have quite a lot of information on their website.
Sooner or later when forming your small business or even if you choose to work from home, you will have to carry out a company set up. This need not be a complex task but only you can decide at the time whether you need to carry out a company set up……
……..or whether the disadvantages of company set up outweigh the advantages.
Company Registration-the Advantages and Disadvantages of a Limited Company in Ireland
If you are thinking of starting a business in Ireland you may be considering registering a limited company rather than trading as a sole trader or partnership.
What are the advantages of setting up a limited company?
There are three broad advantages of registering a company with the Companies Registration Office (www.cro.ie).
Advantages of a limited company
Firstly a company has a separate and distinct legal identity from it’s member or shareholders. This allows it to enter into contracts, sue and be sued, and so on in it’s own right.
Secondly a company can live forever provided it is not liquidated or struck off the companies’ register-this is called perpetual succession.
Thirdly it’s potential liability is limited to it’s paid up share capital unless it is an unlimited company but the vast majority of companies in Ireland are private limited companies. In theory this means that you as shareholder or member are protected from creditors and banks should the company cease. In practice however you will find that many banks and suppliers will insist on personal guarantees from directors or shareholders.
Disadvantages of a limited company
The main disadvantage of setting up your own company are
- Cost, although this is minimal as you can incorporate a company for between €200 and €300
- Filing financial statements every year with the Companies Registration Office with those details being open to public scrutiny.
On balance, notwithstanding the limitations on the concept of limited liability and protection from creditors, setting up a company is a smart move. The alternatives of trading as a sole trader or partner in a partnership offer no protection from creditors and can leave you open to losing everything you own and bankruptcy.