What kind of company to use?

The wife is looking to setup a creche with another woman and we need to look at setting up the business. I have looked at many of the existing posts and links on AAM but I have not seen anything which will help me determine what type of entity they should operate as. I think a limited company may be the way to go but areas such as whether they need to register for vat etc are clouding the issue.

Any comments/pointers/referrals appreciated.

You have two choices - set up as a partnership or set up as a limited company.

I would recommend a limited company as there must be a fairly big risk of claims against the company for accidents and stuff like that. You will have adequate insurance, but just in case there is a problem, this limit on your liability would be valuable.

If you set up a partnership, the partners will be jointly and severally liable. So if someone wins a claim for €500k in damages, if her partner does not have the money, your wife would have to pay the full €500k.

It's probably an easier structure as well for clarifying who owns what percentage of the business.

I don't know, but I doubt if there is a requirement to register for VAT. Call the VAT office and they will tell you.

Brendan

In recent years, changes were made to company law which now mean that directors can be held personally responsible for company debts where these debts arise due the 'negligence' of the directors. Hence limited liability protection as we know it is largely a thing of the past.

Yes from the but of reading I have done the limited company looks to be the way go alright. There will be adequate insurance against the business. In terms of VAT, I thought that if the income of the company was greater than €25k then you had to register for VAT? In the case of a creche it is VAT exempt, but I thought this was only in terms of charging VAT.

Will get onto revenue and post the details the provide.

Hi Ubi

My understanding is that if a company trades negligently, the directors will be held to be liable. But if an otherwise well run business, gets hit by a once-off failure of a large debtor or a major award for damages, then they would not be made personally liable.

If a person runs a company in such a way that their creditors are at risk, then they cannot avoid personal liability for their debts.

I have to say that this is a general understanding, and I can't point to case law on it. So maybe I am completely wrong.

Brendan

judge said:

Yes from the but of reading I have done the limited company looks to be the way go alright. There will be adequate insurance against the business. In terms of VAT, I thought that if the income of the company was greater than €25k then you had to register for VAT? In the case of a creche it is VAT exempt, but I thought this was only in terms of charging VAT.

Click to expand...

If there is a requirement to register for VAT it will not matter whether you are a company, partnership or sole trader you will still have to register.

Hi Brendan

The more severe interpretation of the limited liability issue, which I outlined above, has been given by several company law experts who have addressed the topic in the course of professional CPD seminars in recent years. The basic logic is that it is up to the courts to adjudicate on each individual case of alleged negligence. In the current climate, the feeling is that judges will tend to side with the aggrieved party (generally the Revenue or other major creditors) in adjudicating against the director(s) concerned unless the director(s) can demonstrate exemplary levels of compliance with governance standards.

Faced with a powerful adversary such as the Revenue, and the difficulty of achieving anything near 100% compliance with all regulations affecting their business, even the most resourceful and organised of entrepreneurs will struggle to win such a case.

Ok Ubi

But company directors have some chance. Sole traders or partners have no chance.

Brendan