This article aims to set out some of the main consequences of incorporation which may help you make your decision.

Separate legal entity:

Forming a company means that you have created a separate legal person in law. A company can enter into contracts on its own behalf, can sue or be sued. It can also own property. Of course, this separate legal entity is not absolute and it can be set aside in certain circumstances. This is outside the scope of this article.

Limit your liability:

Limiting liability is the central most important attribute of forming a company. If you are a shareholder in a company, you own the company. Your liability is capped at the unpaid amount, if any, of any shares held by shareholders in the company. Note: the company is liable to pay its debts and liabilities.

If you are a start up business seeking finance from a bank, it is likely you, the shareholder/owner, will be required to give a personal guarantee.

Transfer of ownership in company

Your ownership can easily be transferred subject to certain restrictions in the articles of association.

Perpetual succession

The death of a shareholder does not result in the dissolution of the company, which will continue to perform existing contracts.

Common Seal

A company, under incorporation, when executing documents affix’s its common seal to the relevant document in the presence of two directors.

Floating charges

A company can grant a floating charge over all its assets in order to secure the indebtedness of the company.

Taxation

Companies are treated differently when it comes to tax. It pays corporation tax on its profits.

Ultra vires rule

If a company enters into a contract that is beyond its power under the memorandum of association, the contract will be deemed to be void. Ensure that your business and acts of the company are permitted actions by the memorandum of association.

Some of the above consequences give you an idea of what it means to incorporate in Ireland. Limiting your liability is probably the most important factor that makes the decision an easy one for businesses.

This article is general in nature and cannot be regarded as legal advice.  It is general commentary only.  You should not rely on the contents of this article without consulting one of our Solicitors.  If you would like advice regarding how the law applies to your individual circumstances, then please contact Roisin O’Connell Solicitors.