So, you’ve come up with a great idea for a commercial venture, and now you want to formalise that commercial venture by putting a legal structure in place. Good. Your next question may naturally be, “what does this look like?”. Great question. Two of the most common (though not only) legal structures in Jamaica are a registration as a business (usually a sole trader), or a for-profit limited liability company. This article will look broadly at some of the features of both.

Regime, Requirement, and Formation 

Both businesses and companies are registered at the Companies Office of Jamaica (“COJ”), but both are governed by separate legal regimes. Businesses are registered under the Registrationof Business Names Act, while companies are incorporated under the Companies Act. 

Another key difference is what, or should we say “who” is required to get the registration going. In a business, one person, operating as a sole trader can register his/her business. In a company, there must be at least one shareholder, one director, and a secretary. While the sole shareholder and director can be the same person, a company cannot have a sole director who is also the secretary. So, in a company, at any time, a minimum of two people is required.

Both businesses and companies are formed with the COJ, using the Business Registration Form (BRF). For a business, this form will ask for, among other things, the name, type of business (e.g. sole trader), address, nature of the business, and details of the owner. The BRF for a company will ask for the name, type of company (e.g. private), address, core business of the company,and details on the director(s) and secretary. The paperwork for a company does not end here though, as Articles of Incorporation(Form 1A), and a Beneficial Ownership Return Form are also required be filed to incorporate the company.

Another significant difference between the two structures, is the cost for registration. Registering a sole trader business is J$2,500.00, while the fee for incorporating a company is J$27,500.00.

Legal Personality and Liability

Another fundamental distinction between registering as abusiness, or incorporating as a company, has to do with legal personality and liability. Where a person registers a business as a sole trader, there is no legal separation of the person from the business. They remain one and the same legal person. This differs from incorporating a company, where the company will be its own legal person, separate from its owners. Why this is important, has to do with liability. With a business registration, because the owner and the business are the same, the liabilitiesof the business are the owner’s personal liabilities. For example, if the business is sued, the claim is against the owner, personally, and against his/her personal assets. A company, however, as a distinct legal person, can be sued in its own name, and the liability of its owners is limited, meaning that, using the same example, if the company is sued, only under extraordinary circumstances will the owners be found personally liable.

Ongoing obligations

Once a business is registered, a certificate of registration is provided, and the legal structure is up and running. It is important to note, however, that the registration is not infinite, and generally expires after three (3) years. It is important to note, carefully, the expiration date, and ensure that, if the business is still operating, that the registration is renewed prior to expiration. In a company, once incorporated, there is no expiry date. Provided that the obligations of the company are fulfilled, and the company is kept up to date, the company can go on indefinitely. One of these obligations for a company, is that it must, each year, on the anniversary of its incorporation, file its Annual Return with the COJ. Both businesses and companies, have the obligation to keep the COJ up to date on any changes within the structure, and both structures are required to keep up to date with filings related to tax obligations.

Conclusion

When speaking about a “business” or a “company”, while theseterms are colloquially used interchangeably, these legal structures are not the same. Therefore, in deciding on which legal structure to use, you should ensure that you consult with a knowledgeable commercial attorney, who can walk you through the pros and cons of each, and other existing structures, so that you can make the right call for your endeavour.