4 Things You Must Get Right When Starting Your Own Business

start-your-own-business-ireland

Deciding to start your own business is easy.

However, ensuring that your start up does not become an insignificant statistic in the “graveyard of broken dreams” is difficult.

85% of startups  fail within 3 years..

Despite the massive changes in technology in the last few years the fundamentals of starting and running a successful business haven’t changed much.

Let’s take a look at 4 critical areas you ought to think about to increase the probability of success for your business. There are many other fundamentals you will need to be concerned with but these 4 must be taken care of correctly.

1. Legal structure of your business

The legal structure that you choose for your new business will have far reaching consequences and you should be crystal clear as to what structure is best for you and why.

There are three common ways to structure your business:

a) Sole trader

b) Partnership

c) Limited company.

Sole trader

As a sole trader you will be solely responsible for the debts of your business. Clearly this is something that requires serious consideration on your behalf as failure could leave you saddled with the debts of the business, even after you cease trading.

Partnership

Setting up your new business with a partner and forming a partnership to conduct your business means that each of you will be liable for the debts of the partnership.

It is important to understand that this does not mean the debts are shared or split between you-each of the partners will be jointly and severally liable for all debts of the business.

Limited Liability Company

A limited liability company has a separate legal identity from it’s promoters, shareholders or directors and the company’s liability, if things go wrong, will be limited to it’s paid up share capital.

While this may seem to offer significant protection to you from exposure to creditors and/or banks if things go wrong, in practice the protection is illusory to a great extent as many suppliers and all banks will look for personal guarantees or bonds from you to cover the debts of the company.

2. Professional advisors

Having professional advisors that you can rely on and whose judgement you respect can provide a great sounding board for many of the significant decisions you will need to make on your own.

So get yourself a good accountant and solicitor to whom you can turn and rely on.

Things like registration for vat and as an employer, business name registration or company set up are necessary details that will need to be executed properly and which will allow you to spend more time on the overall development of your business.

3. Cash flow budgeting

A prime reason for the failure of startups is a shortage of cash.

Cash is king, especially in the early days and you need to be clear about the difference between profitability and cash flow and the ability of new businesses to suck considerably more cash than anticipated in the early days.

4. Human Resources

A vital part of the success or failure of your new business will be your people.

Choosing the right staff is one thing; managing them is another.

There are a number of key areas you need to be careful about as an employer. I have learned these things the hard way.

But the potential for costly employment related claims is fairly extensive.

In conclusion, starting a new business can be an exhilarating white knuckle ride.

Taking care of these four fundamentals will ensure that it will be an enjoyable and profitable journey too.
By Terry Gorry
Google+

How To Set Up a Limited Company (And the Advantages and Disadvantages of Limited Company Status)

Thinking about setting up a limited company?

set-up-limited-company
Advantages and disadvantages of limited liability

Fancy the thought of becoming a company director? And majority shareholder?

But you’re not sure whether it is a good idea or whether you need to?

This piece will take a look at how to register a limited company in Ireland, the different types of limited company and, most importantly of all, the advantages and disadvantages of setting up a limited company.

Update 2015

The law in this area is due to change on 1st June, 2015 when the Companies act, 2014 comes into force.

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.

Rather than do it yourself though you can engage the services of a solicitor who will probably have formed many companies on behalf of clients. Your solicitor will also probably use a reputable company formation service which will make formation easier and less likely to cause any delays.

Memorandum of association

Your company set up will involve what’s 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

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.

The Advantages and Disadvantages of a Setting Up a Limited Company

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 its member or shareholders. This allows it to enter into contracts, sue and be sued, and so on in its 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 its potential liability is limited to its 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

  1. Cost, although this is minimal as you can incorporate a company for between €200 and €300;
  2. Filing financial statements every year with the Companies Registration Office with those details being open to public scrutiny.

On balance, despite 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.

Conclusion
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 one that should not be taken for granted.

You might also be interested in the 7 critical elements of a shareholders agreement.
By Terry Gorry
Google+