News and Insights
26 October 2017
The decision to start your own small business is an exciting one, but one you should not take lightly. Setting up on your own (whether you are starting a company or a partnership) gives you the freedom to drive your business forward. However, that freedom is not absolute; Jersey businesses and those involved in running them are subject to a multitude of laws, regulations and obligations. In this general overview we scratch the surface of some of the considerations you should have when starting your new venture.
Types of business models
There are different business models that you could consider when starting up a small business, which can be as follows:
- Sole Traders;
- Partnerships; and
A sole trader, in simple terms is when you as an individual start up a business in your own name, and where there is no distinction between the business and yourself. For example, you lease a shop in your own name and trade as a beauty therapist. In this situation, you and the business (albeit you may trade under a different name) are the same.
A partnership is similar to being a sole trader, however, rather than just you as an individual trading under a business name, you trade with others. Here you are, as a collective, jointly and severally liable for each other’s acts. Using the same example of the beauty therapist, in this situation you and your partners lease a shop and decide to trade under a business name, but you and your partners are all responsible for the business, its debts and can benefit from its profits.
Creating a company is another way to trade. Applying it to the beauty therapist example, in this situation you will need to incorporate a company with the Jersey Companies Registry, and once incorporated the company becomes a legal person. This means that it can contract with others and employ people for instance in its own name. Before incorporating a company, you will need to consider a variety of issues, including how you want the ownership to look and also the board of directors. If this is a route that you are considering, you will need to seek advice on how best to go forwards.
Other than the general set up of a company, the owner will most likely want to control the company and therefore become a director. Becoming a company director is not just a title; the role has duties and responsibilities that you shouldn’t ignore. If you are considering becoming a director do not underestimate your obligations to the company and its shareholders. Beware anybody who says your appointment is just a formality; this is simply not true.
A company has its own legal personality and as director you will owe general duties to it. You are responsible for the management of the company and must act in a way most likely to promote its success and benefit its shareholders. You must also consider the interest of creditors and employees.
Under the Companies (Jersey) Law 1991 a director must, amongst other things, act honestly and in good faith with a view to the best interests of the company and exercise care, diligence and skill etc.
A breach of these duties could mean that the company seeks remedies of injunction, compensation or damages against you personally. There is a general prohibition on a company providing indemnities to its directors. Breaches of duties are punishable by way of a fine, possible disqualification and, in the most serious cases, imprisonment.
There is, therefore, a lot to think about before setting up a business and if this is something that you are considering, Viberts would be happy to have a conversation with you to help you pursue your dream. Call 888666.