A limited company is a separate legal entity to its owners. It is owned by its shareholders and is managed by its directors. A company is independent to its shareholders and directors and can continue in business even if its shareholders and directors change.
If the company fails, the shareholders are not required to contribute funds to the company to pay outstanding debts. Their liability is limited to the amount of shares they purchase.
It is for this reason that many business owners set up as a limited company rather than as a sole trader. The personal assets of the shareholders/directors generally cannot be seized to pay the company’s debts.
However, directors need to ensure that they are aware of and comply with their duties and responsibilities. Many directors also sign personal guarantees on the company’s loans which make them responsible for those loans if the company cannot repay them.
The most popular company types in Ireland
- Private limited company limited by shares
- Single member company (which is the same as the private limited company limited by shares but has only one shareholder)
Remember that limited companies must file an annual return with the Companies Registration Office (CRO) providing details of the shareholders and directors and attaching the accounts of the company. For smaller companies, abridged accounts can be submitted which do not include the Profit and Loss Account. The company accounts and the details of shareholders and directors are accessible by the general public from the CRO website.
What you need to set up a company
- A unique company name. You can check if your name is already taken on the CRO website. A company name which sounds similar to or could be mistaken for another name already on the register will normally be rejected.
- At least one shareholder.
- At least one director.
- A company secretary. This can be one of the directors.
- A registered office. This is the address that CRO post and official legal notices will be sent to. This can be your accountant’s or solicitor’s address if required.
- Constitution of the company. These set out the rules and regulations surrounding the company.
Forming the company
To form the company you will need to submit Form A1 to the CRO along with the Memorandum and Articles of the company and the appropriate fee. Form A1 will need to be witnessed by a solicitor (or notary public/commissioner for oaths/peace commissioner). Once the company is registered, you will receive a certificate of registration which you should keep in a safe place.
There are many company formation agents who can assist you with forming a company. Using an agent is a faster process as they are under a special scheme with the CRO. They can provide you with Memorandum and Articles of Association as well as additional items such as a company seal (used for stamping official documents) and a company register (an official book for keeping a record of directors and shareholders etc.)
When the company is formed the next step is to register the company for taxation with the Revenue Commissioners which I will cover in my next blogpost.