Business planning for
Jamaican Entrepreneurs-Type of Organisation Structure
There are a number of structures that you can choose
from when creating your business. The four main types of business structures
commonly used by small businesses are:
- v Sole trader: an individual trading on their own
- v Partnership: an association of people or entities running a business together, but not as a company
- v Trust: an entity that holds property or income for the benefit of others
- v Company: a legal entity separate from its shareholders.
When deciding upon a structure for your business,
choose the one that best suits your business needs and remember that there are
advantages and disadvantages for each. Choosing your business structure is an
important decision that can determine the licenses you will need to operate, so
you need to investigate each option carefully.
Of all the choices you make when starting a
business, one of the most important is the type of legal structure you select
for your company. Not only will this decision have an impact on how much you
pay in taxes, it will affect the amount of paperwork your business is required
to do, the personal liability you face and your ability to raise money.
The most appropriate structure depends on the
individual circumstances of each business owner.
It's not a decision to be entered into lightly,
either, or one that should be made without sound counsel from business experts
to consider the pros and cons of various business entities.
The four main business structures mentioned above that
are commonly used in small businesses have increasing level of legal complexity.
Each has
advantages and disadvantages.
Sole
trader
This is the easiest method of starting a business.
As sole proprietor you will be responsible for all business decisions and deal
with all the financial matters.
Advantages:
- ü Low registration fee.
- ü Simple business structure and documentation.
- ü You maintain total control over business decisions.
- ü All profits and capital belong to you.
- ü Tax benefits exist if profits are low.
Disadvantages:
- ü Your capital is limited by your personal assets.
- ü Limited expertise and no one else to share the workload.
- ü It will be difficult for you to take time off.
- ü Your responsibilities can cut into your family and holiday time.
- ü No one to operate the business when you are ill.
- ü You will be personally responsible for all debts and liabilities.
- ü It can be difficult to sell ownership of the business.
- ü There are tax disadvantages when profits are high.
Partnership
A partnership is formed when two or more people go
into business together. You can operate under your own names or with a
registered business name.
Advantages:
- ü Inexpensive to establish.
- ü Tax advantages exist if your business partner is from your family.
- ü Having a partner means more start-up capital.
- ü Broader range of knowledge, experience and skills.
- ü Some ability to take time off.
- ü It is relatively easy to dissolve and recover your share of investment.
- ü Your partner can sustain the business during your holidays or illness.
- ü Profits belong to you and your partners.
- ü Shared control reduces your individual burdens.
Disadvantages:
- ü Potential for disputes over profit sharing, administration and development.
- ü Personality clashes.
- ü You will be personally responsible for business debts and liabilities incurred by your partners.
- ü Your personal assets are at risk to settle partnership debts.
- ü There can be some taxation disadvantages.
- ü Conflict on deciding final authority.
- ü Problems when one person leaves or another wishes to join.
Company
A company is an independent legal entity.
You will run the business as a director and own the
business as a shareholder.
Advantages:
- ü Your liability for the debts of the business is limited to the money you have invested in the business (unless you personally guarantee debts).
- ü Your limited liability can make it easier to attract investment.
- ü You can own and operate as the sole shareholder and director.
- ü You have no personal responsibility for debts unless the debts are reckless, negligent or fraudulent.
- ü A company can own property.
Disadvantages:
- ü Large initial establishment fee.
- ü Complex establishment rules.
- ü Strict regulations.
- ü Attract higher compliance costs than other business structures.
- ü Your business will be subject to company tax.
- ü Limitations on who can buy shares can make it difficult for shareholders to recover their investment.
Trust
A trust is a structure where a trustee (typically an
individual or company) operates a business on behalf of the beneficiaries of
the trust.
For example, where a family business is run through
a trust, the trustee (the business) would be run on behalf of the family
members, who are beneficiaries.
Advantages:
- Often used for tax minimisation by business owners.
- Limited liability for each beneficiary, which can assist with asset protection.
- Can assist with transfer of assets to the next generation.
Disadvantages:
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- ü Can introduce complexity into a business - will typically require professional assistance to maintain.
- ü Difficult to make changes to a trust or dissolve it.
- ü Subject to changing regulatory landscape
For information on how UHY Dawgen can assist you
in setting up your operation in Jamaica contact us. UHY Dawgen operates from 4
strategic locations in Jamaica.There are five easy ways to contact us. Simply
call, email, fax, write or just stop by.
Head Office - Kingston
Unit
34, Winchester Business Centre, 15 Hope Road,
Kingston
10, Jamaica, West Indies
Telephone:876-9084007/7542074/
9064827
(International No.USA)
937-7-DAWGEN(937-7329436)
Fax:7540380
Email:info@dawgen.com
BRANCHES
§ Montego Bay,St. James
Shop
EU6, Whitter Village, Ironshore, St. James
Telephone:
876-876-9533793/953-8486 Fax: 953-3058/7540380
Email:infobranch@dawgen.com
§
Ocho Rios, St.Ann
Shop
C1, 101Main Street, Ocho Rios, St.Ann
Telephone:
974-5373/9748772 Fax: 754-0380
Email:infobranch@dawgen.com
§ Mandeville, Manchester
Shop L1 & K1,Grove Court Plaza, 16 Park
Crescent, Mandeville, Manchester
Telephone:
962-6369 Fax: 754-0380 Email:infobranch@dawgen.com
UHY
Dawgen is a member of UHY, an international association of independent
accounting and consulting firms, whose organising body is Urbach Hacker Young
International Limited, a UK company. Each member of UHY is a separate and
independent firm. The services described herein are provided by UHY Dawgen and
not by Urbach Hacker Young International Limited or any other member of
UHY. Neither Urbach Hacker Young
International Limited nor any member of UHY has any liability for services
provided by other members
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