In St. Lucia, there continues to be an entrepreneurial energy which plays a crucial role in fueling economic growth and development. More persons are exploring entrepreneurship and may wonder what business structures are available in St. Lucia, the differences between them and which one will most likely suit their needs.
The common business structures in St. Lucia are sole proprietorships, partnerships and limited liability companies.
We have provided an overview of each structure below. We specifically discuss registration requirements, advantages, disadvantages and dissolution:
Sole Proprietorship
A sole proprietorship, also known as a sole trader, is the simplest form of business structure. As the name suggests, it is owned and operated by one person. Examples of these in St. Lucia are community shops, grocers, a car wash or a bar.
It is set up quite easily. Under the Registration of Business Names Act, every person who is carrying on business in St. Lucia under a name other than their own name must register with the Registry of Companies and Intellectual Property.
Prior to registering, the business owner must complete a business name search. If approved, he or she will be required to complete a form under the Registration of Business Names Act. The applicant’s name, the business name, the general nature of the business, principal place of business and commencement date must be stated on the form. The applicant will also have to complete a statutory declaration.
The forms, the approved business name and the fee must be submitted to the Registry. Upon approval, the Registrar will issue a certificate of registration. This certificate should be exhibited in a conspicuous place at the principal place of business.
The sole proprietor assumes full control and responsibility for the business’ operations, profits and liabilities. Essentially, in this structure, unlike companies, there is no legal distinction between the business and the business owner. The latter is personally liable for all and every business debt and obligation.
Where the sole trader ceases to carry on business or has died, the person or his or her personal representative must file a notice with the Registrar within three (3) calendar months of cessation of the business. Upon receipt of the notice, the Registrar may remove the individual from the register.
Partnership
A partnership is a business structure in which two or more individuals or entities come together to carry on a business with a view to making a profit.
The partnership may be registered under the Registration of Business Names Act by completing and submitting the prescribed forms together with the prescribed fee to the Registry of Companies and Intellectual Property. As with sole proprietorships, a certificate of registration is issued and should be exhibited in a conspicuous position at the firm’s principal place of business.
One may consider some advantages of this type of business structure which includes:
- the shared responsibilities and skills – partnerships allow persons with complementary skills and expertise to come together and pool their resources and knowledge leading to more effective decision-making and problem-solving;
- shared financial burden – this may make it easier to raise capital and fund the business; and
- access to resources – partnerships may provide an expanded network to facilitate business growth.
However, there are possible downsides of a partnership. These include:
- the power of each partner, as an agent of the firm, to bind the firm and his or her partners;
- unlimited liability – each partner is jointly and severally liable for all debts and obligations while they’re a partner and even after retirement and death; and
- shared decision-making – this is a double-edged sword as partnerships require consensus and agreement particularly when making key decisions, but this can lead to conflict and/or delays when there is no shared vision or even different opinions.
The partnership comes to an end upon dissolution. This may be by agreement, upon the death or bankruptcy of a partner, by expiration of a fixed term, by any partner giving notice, by any event which makes it unlawful for the business to be carried on, or by court order.
Limited Liability Company
The Companies Act defines a company as ‘a body corporate that is incorporated or continued under this Act’. Any person or persons 18 years and over who are of sound mind and do not have the status of a bankrupt may incorporate a company in St. Lucia.
Prior to registering a company for profit, the incorporators must complete a name search or a name search and reservation. Where the incorporator chooses the latter, then upon payment of the prescribed name search and name reservation fee and provided that the name requested is available for use, the Registrar may reserve the proposed name of the company for 90 days.
The incorporators must, within the period of validity of the name reservation, complete and submit to the Registry of Companies and Intellectual Property, the articles of incorporation together with the notice of registered office, the notice of directors, consent(s) to act as director, a statutory declaration by an attorney-at-law and the prescribed fee. Once approved, a certificate of incorporation is issued.
Upon incorporation, the company must issue shares and file bye-laws, the notice of secretary, return of allotments and notice of beneficial owners.
The shareholders are the owners of the company and have the right to elect directors and receive dividends, that is, the profits from the company’s business. The directors, who may or may not be shareholders, are responsible for managing the company.
Once incorporated, the company is a separate legal entity from its directors and shareholders. It can enter into contracts, sue and be sued, acquire assets and trade in its own right.
Companies, when owned by more than one person, offer many of the same advantages of a partnership. The main advantage of a limited liability company is that the company’s debts and liabilities are not, save in exceptional circumstances, attributed to its directors or shareholders.
However, there are a few disadvantages to incorporation. There are legal and regulatory requirements to maintain the company. This includes filing annual returns and other notices (recording changes) at the Registry of Companies and Intellectual Property. The costs for registering and maintaining a company are accordingly higher than for a sole proprietorship or partnership. Additionally, the company must file its own tax returns at the Inland Revenue Department.
The company may be wound up and dissolved, either voluntarily by the shareholders or involuntarily, by court order.
Conclusion
When choosing a business structure in St. Lucia, it is important to consider factors such as the nature of business, personal liability protection, and operational flexibility. It is therefore advisable to consult with a legal or financial professional to determine the most suitable business structure for your specific needs and circumstances.
Prepared by Michael DuBoulay, Partner and Leonnette Headley, Associate
FLOISSAC, DUBOULAY & THOMAS provides this information for educational purposes only. It should not be construed or relied on as legal advice or to create a lawyer-client relationship. This guidance note is not intended to be, and should not be construed as, legal advice for any particular situation and you should not act upon this information without seeking advice from a lawyer. If you have any questions, please feel free to contact us at info@fdt.law.