Planning is Key (Part Three): Legalities

In part three of this series of posts we will discuss the legalities of the AC business. Just because

In part three of this series of posts we will discuss the legalities of the AC business. Just because your business is “virtual” this doesn’t mean you are exempt from fulfilling legal and tax obligations. Since laws vary from one country to the next, we will only cover basic points so it is important you find out exactly what legal and tax obligations you have according to your country’s legal system as I do not presume to know how these may differ in your area or substitute professional advice so please consider this section as a rough guide only for questions you must research yourself.

There are different ways in which you can set your business up.You will be taxed according to the tax system you choose and in most countries the most common ways in which to register are as follows:

  1. Sole-Proprietor: This is the system  the majority use when setting up their businesses it is the cheapest solution where initial costs are concerned and it is also the easiest to maintain. There is no legal distinction between you and the business, meaning that company debts are not separate so your personal assets can be called into play to pay off any debts incurred. You would normally trade under your own name but it is possible to incorporate a commercial name as well but check with your local authorities on this subject as some do not recognize the commercial name for tax purposes.
  2. Corporation: A corporation is made up of a group of shareholders who are not personally liable in the event the company acquires debt. The would risk losing their investment in the company but not their personal assets. A Board of Directors is formed where each member has the right to vote on company decisions, normally in keeping with each members participation within the company. A different set of tax regulations would apply, more complicated than those of a sole-proprietor.
  3. Limited Liability:This type of company can be made up of one or various members but their liability is limited to a fixed amount of money, the amount invested, however the shareholder may still be liable for his own actions. Registration is less complex than that of a corporation and simpler to maintain. This option is also viable for small companies with only one owner.


or is a Limited Company the way to go for you?

or is a Company the way to go for you?


Once you’ve decided on the legal system that best suits you, you must prepare for the tax implications involved

Are you going it solo?

Are you going it solo?

and budget part of your earnings that will be paid in taxes either on a quarterly or annual basis. Most systems work around 20% of your profit but again this differs depending on your country and the system you are registered in so I would encourage you to seek out a reputable tax advisor who will be able to inform you of the pros and cons of each system and how to budget for it. It is vital for you to do your homework here to see whether the business will be financially feasible after you consider tax deductions. It’s better to pay out for advice sooner rather than later so that you are not left with an unexpected tax bill at the end of your tax year. Also, if you are not familiar with bookkeeping and accounting your advisor will be able to input your books and file your tax returns. It would be important to set aside time each week or at least at a regular interval to keep on top of your billing.

Other permits and licenses may be necessary in order to start trading. Check your local government regulations to make sure you have all legally required paperwork to operate before you open your business. If you work from home you may not be obligated to have an opening license but it still may be compulsory to register your activity.

At this point you must also think about the name you would like to operate under and check its availability. Each country has different procedures so you must research this matter and follow the set guidelines. What name to choose will be discussed in a later chapter.

Civil liability insurance may be a requirement in your area in the event you are sued for example but confirm this point with a local insurance company as you may not be required to obtain this insurance based on the type of services you will provide.

I hope this little guide helps you to navigate the legal ins and outs of setting up a business but I can’t stress enough how important it is for you to consult your local laws to make sure your company is legal before you start operating. I am not providing you with legal advice, I am simply offering you with clues as to what you need to research beforehand.

Peace of Mind…

About Sabrina L. Williams

Although I was born in the UK, I moved to the Canary Islands, Spain at a young age and I haven't looked back. The Canaries is a fantastic place to live, I mean you can do all types of outdoor activities practically all year round because of the great weather. Horses are my poison but the islands are also a superb spot for water sports so they do attract a lot of attention from people around the world. Anyway, enough about that. Back in 2011, I made one of the biggest, scariest yet best decisions I'd ever made and set-up my own business in the middle of a recession. I love what I do as no two days are the same, plus Spanish law keeps me on my toes as it is constantly changing (often without warning!) so there is always something new to learn. As I've branched out in the world of Administrative Consultancy, I decided to create a blog to discuss topics of interest to others in my industry and my clients, share tips and experiences, to see what new ideas people have for improving their businesses and the like so I hope you'll find the time to join me on this venture...

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