Cutting Law

Often times when clients approach us to begin a new business venture, their most frequently asked question is “should I set up a business or incorporate a company?” Our response is never “it depends”. Rather, we provide clients with the pros and cons and why we would recommend a particular legal status over the other for a particular industry, business objective or number of owners in the enterprise. Therefore, this article aims to guide business owners and prospective business owners or persons doing business in Guyana on the options available to them in respect of registering a business or incorporating a company, and the pros and cons of doing either.

In Guyana, the two major statutes that govern the legal status of enterprises are the Business Registration Act and the Companies Act. Both acts set out the basic requirements for registration of a business (sole proprietorship or partnership) and a company (public or private limited liability), respectively. While these basic requirements are helpful, we have found that an assessment of them has helped us to answer the looming question: Why this and not that?

Which should you choose?

When choosing a business structure under which to legally identify your business, a person should consider:

1. The aims and objectives of the business (Are we providing goods and services on a basic level, for distribution, for local or global consumers etc.)
2. The levels of risk involved (Is the business high risk or low risk? Will I require large investment or is the business purely self/family-funded? Would I need to give investors a share of the business? Should I appoint multiple directors/owners?)
3. Autonomy (The ability to make decisions without intervention of external/third parties)
4. Taxes (Depending on the business type, there are tax obligations. We always advise clients to find a trusted auditor/accountant knowledgeable of changing tax practices in the country and capable of preparing and filing relevant documentation)
5. Audit and governance responsibilities (Based on the business structure, audits and reports are required in lined with the tax / business year and based on the business’ rules, by-laws or other documents)
6. Team (If you are a sole individual versus a 56-member business team, the type of legal business structure will matter to you)
7. Finances / Access to Capital (Do you have the finances or access to capital to support incorporation versus a business registration).
8. Immediate or Long Term (Is the business a start-up, passion project, a side hustle/job/gig or beta tester in the market that is not intended to be long-term versus an entity that has multi-year plans for global or multi-location expansion?)

Though non-exhaustive, the aforementioned list helps you to think of all the eventualities or possibilities that would impact a person’s decision in the formation of their business as a legal entity. As such, the ultimate decision of whether to register a business or incorporate a company rests heavily on the weight of each of the listed items above in each specific case.

How or Where To Start?

Write down the goals, objectives, mission and vision of the business entity. Think of the customers, audience or market that the business hopes to address then begin to write out where the business falls in view of the list of items above, under ‘Which should you choose?’

When you have completed the abovementioned tasks on how or where to start, consult legal counsel and provide them your thoughts and instructions based on the foregoing. This will help both parties to have an insightful initial consultation to propel the actions to be taken forward in a smarter and more productive way.

Disclaimer: This article is not intended to be used as legal advice. If you require legal advice, please seek independent legal advice by contacting legal counsel of your choosing.