Business form

Wed. 06/06/12 - 11:45

One of the most important choices to be made when starting your activities as a self-employed worker is the legal form of your business. You can opt in favour of a one-man business (sole trader), or a company, which is a separate legal entity. Your bookkeeper or accountant can help you make this choice.

One great advantage of a sole trader compared to a company is the freedom allowed to the entrepreneur. A sole trader doesn’t have as many legal obligations with regard to decision-making, profit distribution, etc. The administrative obligations are also considerably lighter.

On the other hand, the company benefits from a different tax system, which is more beneficial in many ways. In most cases it also benefits from limited liability, which means that there is a strict separation between the assets (and possibly the debts) of the company and the assets of the partners.
If you opt in favour of a company, you then have to decide which form of company you should choose:

• Are you alone or are you starting up a business with other people?
• How great are the risks you are taking and how do you plan to limit them?
• Do your fellow founders want to bring in capital or knowledge and labour?
• Must it be easy for partners to leave the company?

The most frequent company forms are:

• the private company with limited liability  (SPRL - société privée à responsabilité limitée). If there is only one founder, then this is referred to as an SPRLU – a one-man private company with limited liability. There is also a variant of this aimed at starter companies, the Starters SPRL ;
• the  general partnership (SNC – société en nom collectif);
• the limited partnership (SCS – société en commandite simple);
• the limited partnership with share capital  (SCA – société en commandite par actions);
• the  cooperative company with limited or unlimited liability (SCRL or SCRI –  société coopérative à responsabilité limitée ou illimitée);
• the public limited company  (SA – société anonyme).