New Business - A sole trader, A partnership or A limited company

[Logical99]

We have secured a contract that gives us sole rights to distribute a leading manufacturers product, the goods will not enter Ireland but it is a profitable, long-term contract. Which Company format option would allow the three shareholders to withdraw profits from the Company in a Tax efficient manner?

Kind regards

 

[jpd]

Sounds dodgy to me - have you any experience of doing business at all?

 

[Logical99]

Sounds dodgy to me - have you any experience of doing business at all?

Not a very helpful response and not what I was expecting from this forum, you know nothing of the work that has gone into securing this contract nor of my extensive business experience in Europe and the Middle East.

 

[jpd]

True, but I would have thought that your question would one of the first things to be considered - surely you had a business advisor or legal advisor who would be able to help with your query

While Ask About Money is fine for getting ideas, proper professional advice would seem needed in this situation

 

[Brendan Burgess]

It is very difficult to answer without more information.

I didn't find any earlier posts which would be helpful.

Here is the best I found online.

The Pros and Cons of Different Business Structures in Ireland

Which business structure is best for a small business in Ireland? There is no one-size-fits-all answer, as the best business structure depends on your specific needs, goals, and circumstances.

www.rda.ie

This can only be for general briefing to help you have a meaningful conversation with your accountant.

The big disadvantage of a partnership is that each partner is jointly and severally liable for the debts of the business.

So if your business fails you must pay the creditors in full yourselves. If one of the other partners has less to lose, they will renege on their debts and leave it to you.

Are you putting up the investment required in equal amounts? If not, I suspect a limited company where the person who puts up the most, owns the most might be better.

And partnerships often don't work out. The business might be successful, but you disagree on strategy. In one sense, a partnership is more flexible to cater for that.

But the absolute key priority for you is to have a partnership agreement which sets out who does what, what salaries are paid, and, most importantly of all, how disputes will be resolved fairly. And what happens if one wants out.

That is more important than the tax consequences at this stage.

Brendan

 

[Logical99]

Brendan

Thank you for your response, the managing of the day-to-day operation of the Company will be managed by myself with my Wife and Son as sleeping partners. It has taken a great deal of time and effort to get to this stage and I will go on to pay for professional advice now, just thought that I would use this resource as a sounding board.

Thank you again Brendan

 

[Brendan Burgess]

Whatever about your wife, what would be the advantage of having a son as a sleeping partner or a shareholder?

If it is your business and you decide against a company, then you should not have partners.

If the business gets into trouble, they would be liable for the debts as well.

For example, if a creditor gets a judgement against you for €500k, then they could force the sale of your family home if your wife is a partner.

If she is not involved in the business, her assets are separate and their claim would be limited to half the proceeds of the house.

You need to have a good discussion with your accountant and then maybe ask for a second opinion here.

Brendan

 

[DeeKie]

You should set up a company to protect your personal assets should the venture fail.

 

[Dub_Steve]

I would agree with Brendan's advice. Under a partnership you're still liable for the debts of the company even if it was someone else's fault. A limited company seems like the best option as there are multiple people involved. The shareholders can take shares in proportion to their investment.

 

[Purple]

If it is your business and you decide against a company, then you should not have partners.

That's what it boils down to.
If it's a business that will generate significant income then form a limited company. If not then run it as a sole trader.