Company Formation
Two of the most frequently asked questions for people looking at a startup scenario are:
1) How do I setup a company, and
2) What type of company should I set up
How do I set up a company?
The Companies Registration Office (CRO www.cro.ie) is the government body responsible for registering all Irish businesses. The offices are on Parnell square in Dublin opposite the entrance to the garden of rememberance. The staff are generally quite helpful and will be able to point you to any forms that you will require. The CRO have a very good website and most things can be now done through their online filing system.
An easier alternative is to use the services of one of the many formation companies that will register the company on your behalf. They will provide you with a company seal (required for many legal docuements such as leases etc.), articles and memorandum of association etc.
Note: Do not be tempted to rush through this stage in your enthusiasm to get started!! The name of the company, list of Directors and Shareholding structure of the comapny, naming of Chairperson, secretary etc are extremely big decisions and should not be taken lightly. For example if down the road you fall out with your partners these details will be deciding factors in who has the upper hand legally!
A formation company will charge about €300 to register the company on your behalf. I have used www.formations.ie and found them to be very professional.
What type of company should I set up?
For most people the choice is either Sole Trader Or Limited liability company. Your accountant should advise you on the best structure for you. Generally speaking sole trader suits an individual running a business primarily on their own i.e A window Cleaning service, Painter etc. It can be a good idea to start the company as a sole trader and then move on to Limited liability if the business grows and more people become involved. The paperwork requirements for a sole trader are significantly less than for limited liability companies.
The idea behind a limited liability company is that an entity (the company) is seperate from the directors and shareholders. For example if a company does not pay its bills the company is sued not the directors. In reality, particularily in the current climate, most suppliers will look for personal guarantees from directors of the company before they will supply. This negates the protection of the limited liability. If a number of people are involved and if the company turnover is likely to be significant than forming a Limited company is recommended. It is important to be aware however that the filing and returns required by the CRO for limited companies are taken very seriously. If you are late with annual returns, significant fines will build up, also companies are entitled to an audit exemption for the first few years. If you do not file your returns on time you will lose this exemption. Furthermore shutting down a limited company is quite difficult and costly (you need to put an advertisement in the paper etc!!). Many people ignore the boring responsibilities of setting up a company in their initial enthusiasm, unless you are aware of your obligations you will find yourself and fellow directors spending lots of money on accounting audits and fines. If you put your head in the sand and ignore your CRO obligations , the company may be handed over to the Office of Corporate affairs who have the power to prosecute companies who breach the regulations. Don’t say I didn’t warn you !!!
What is a company?
A limited liability company is a legal entity registered with the Government. It is widely accepted as the preferred structure for conducting business under. A company carries many advantages with it as well as some legal obligations that company Directors must adhere to.
Limited companies exist in their own right, distinct from the shareholders who own them. This means their finances are clearly separated from the personal finances of their owners.
Shareholders may be individuals or other companies. They are not responsible for the company’s debts (unless they have personally guaranteed a bank loan, for example). However, they may lose the money they have invested in the company if it fails.
Management and raising finance
A director or board of directors make the management decisions.
Finance comes from shareholders, borrowing and retained profits.
Public limited companies can raise money by selling shares on the stock market, but private limited companies cannot.
Records and accounts
Accounts are filed with the CRO.
The directors and secretary are responsible for notifying the CRO of changes in the structure and management of the business.
Profits are usually distributed to shareholders in the form of dividends.
Liability -Shareholders are not personally responsible for the company’s debts, but directors may be asked to guarantee loans to the company.
Choosing a name for your company
Choosing a name for your business is a creative and enjoyable process. It is also one that you need to get right. Customers will deduce a lot from your business name and first impressions count.
While it may be tempting to try to stamp your individual personality on your business name, there are many other issues to consider. Being objective and choosing a name which reflects your business strategy can be more valuable, especially as your business develops.
Creating the right impression
When you are generating ideas about a business name, you initially may want to focus on personal preference. However, an objective approach will enable you to consider the customer first.
Remember that your business name will be the cornerstone of your brand. It should work well wherever you use it – on the phone, in your logo, signage, stationery, advertisements, website, uniforms and any other media you plan to use to reach the market. See our guide on branding: the basics.
Points to help you decide on a name for your business
Do you want the name to reflect what your business does – framing, moving, cleaning, building? Or would something more abstract be suitable?
Would it be a good idea to include your own name?
Do you want a traditional-sounding name, conveying durability and old-fashioned values, or a modern name, suggesting a fresh, innovative approach?
Think about the future – avoid words or phrases that are likely to date quickly.
If you’re likely to be trading overseas, check that the name doesn’t mean anything inappropriate in the relevant languages, and that it can be easily read and pronounced.
Think about callers and customers – avoid very long names, strange wordings and unusual spelling.
Company names – the rules
To make sure your company name is acceptable, work through this list before you send your application to CRO. Ensure that:
your company name ends with limited, or Irish equivalents – this must not be used anywhere other than at the end of the name
the name isn’t offensive
the name isn’t the same as – or very similar to – one already in the register
the name doesn’t include any sensitive words or expressions – unless you have obtained permission to use them
