Startup questions

muckwarrior

A friend and another guy have a business idea which involves a web app, which happens to be my area of expertise. They're trying to get it off the ground with virtually zero capital, so instead of paying me to develop the app they've offered to set up a company between the 3 of us. The idea has potential so I'm seriously considering it, but I have a few reservations.

They mentioned setting up an unlimited company. From what I've read this means that the owners would be fully liable for debts should the company go into liquidation. Since the company would have virtually no outlays, at least at first does this mean I shouldn't have to worry about this?

I realise that there are certain burdens that come with being a director of a company, especially since I already have a full time job, so I was thinking about just taking stock in the company instead. Does this sound feasible? What would be the advantages and disadvantages of this?

Sorry, a bit clueless about this kind of stuff so any advice appreciated.

enviro

See here


and here


here also

dbran

Hi

I dont see the reason for an unlimited liability company other then to avoid filing returns in the CRO. A limited liability company gives better protection as well as ownership structure. Dont forget it is not just suppliers who may wish to sue you but the users of your product or services.

Kind Regards


dbran

smeharg

An unlimited company must file an annual return, it doesn't need to file accounts though.

Another consideration is that due to an anomaly in company law an unlimited company cannot avail of audit exemption.

A company of some sort is probably the most suitable option as there are 3 of you involved. Just make sure you have an exit strategy, and agreements in place should any of you want to part company, or pass away, or sell their shares etc.

The Corinthian

muckwarrior wrote: »

They mentioned setting up an unlimited company. From what I've read this means that the owners would be fully liable for debts should the company go into liquidation. Since the company would have virtually no outlays, at least at first does this mean I shouldn't have to worry about this?

Yes and no. The company should have virtually no outlays, but that can change and so you could become responsible towards a part of a debt incurred by one of the other partners. One way around this is to sign a partnership contract that lays a clause, such as where a purchase over, for example, €1,000 is made, the written agreement of all partners should be sought, otherwise it becomes the personal debt of the person making the purchase.

Secondly liability is a potential issue too, although this can be mitigated with professional indemnity insurance.

I realise that there are certain burdens that come with being a director of a company, especially since I already have a full time job, so I was thinking about just taking stock in the company instead. Does this sound feasible? What would be the advantages and disadvantages of this?

I don't know if this is legally feasible with an unlimited liability partnership. If it is, or with other company types, the main advantage would be very limited financial or legal responsibilities and the main disadvantage would tend to be lack of executive power.

dbran wrote: »

I dont see the reason for an unlimited liability company other then to avoid filing returns in the CRO.

Unlimited liability companies are handy in the very early stages of a venture, when it is still largely talk which may come to nothing - because if it does come to nothing they can be folded up very easily, while with an Ltd the process of even voluntary wind-up can be both complicated and expensive.

Certainly, after those very early stages of a venture, I'd agree with you.

muckwarrior

Thanks for the info guys.

One of my worries is having to pay class s prsi if I become a company director, and not being eligible for social welfare in the event that I ever lost my job. The other guys are under the impression that I don't have to worry about this with an unlimited company, but I haven't been able to find anything to back this up.

In the scenario that we start an unlimited company that folds in a few months having done very little, what are the PRSI (or other) implications of me technically having been a company director?