Difference between Business Entities in Barbados

The choice of business entity type has important implications. Let's examine these differences.

Registered Business Name

 If you're planning on doing business using a name other than your individual name or your business entity's official name, you will need to register a "Business Name". A Business Name offers credibility for your business, privacy if you do not desire to use your personal name, and options for marketing your business.

Advantages of Registering a Business Name:

1. Ease and affordability. Registering a business name is easier and cheaper than the other types of business entities.

2. Separation of business and private life. Your business identity and personal life can be kept separate with a Registered Business Name. It allows you to promote your business without using your personal name. 

3. Branding and marketing. When branding or marketing, a Registered Business Name allows you to have a name that promotes the product or service you are offering.

4. Credibility. Registering a Business Name adds credibility to your business. 

5. Expansion. With a Registered Business Name, a Company or individual can segment their business. Say you have multiple multiple Business Names representing parts of the overall business with Each Business Name branded with the segment of the Business it represents.

6. Less reporting. There are fewer reporting requirements for a Registered Business Name.

Disadvantages of Registering a Business Name:

1. Not a separate legal entity. A Registered Business Name and its owner or owners are treated as one and the same legally. Therefore, the owner or owners are directly liable for the liability of the business and for any debt owed by the business.

2. Tax liability. As a result of the Registered Business Name and the owner or owners having no separate legal identity, the profits of the business are subject to the higher individual tax rate of the owner or owners rather than the lower corporate tax rate of a company or society.

Companies

A company is an entity incorporated under the Companies Act of Barbados. It is a separate legal entity from its shareholders and has the capacity, rights, powers, and privileges of an individual.

Advantages

1. Separate legal entity - When a company is incorporated it exists as a separate legal entity from its owners or shareholders.

2. Limited liability protection - With a company, the liability of the owners or shareholders is limited to the amount invested in the company.

3. Limited Liability means that the owners or shareholders are usually not personally responsible for the company’s debts. For example, should the company run into financial difficulty the owners or shareholders do not have to use personal money to pay the company’s debts.

4. Attractive tax rate - Companies in Barbados are currently taxed at a rate of 5.5% on taxable corporate income up to 1 million Barbados dollars. 

5. Ability to raise funds without increasing debt - A company is a suitable structure to attract investors. Shares in the company can be sold to investors to raise money to fund the operations of the company.

6. Perpetual existence - In theory, a company can outlive its owners or shareholders. This makes a company a good structure that can be used to build a family legacy and passed on to the next generation.

Disadvantages

1. Cost of Setup - A company is more expensive to set up than a Registered Business or Partnership.

2. Disclosure and compliance requirements - A company is required to disclose more information to regulators than other business types. Companies also have more compliance requirements than other business types. For example, companies are required to file certain documents at the Corporate Affairs and Intellectual Property Office on an annual basis, and information related to the structure of the company must be contained in these documents.

3. Shared ownership and profits - If a company has more than 1 owner or shareholder the ownership is shared between each owner or shareholder. Further, the profits, in the form of dividends, of the company are split between the owners or shareholders in accordance with what is agreed by the owners or shareholders. 

Societies with Restricted Liability (SRL)

A Society with Restricted Liability (SRL) is an entity organised under the Companies Act of Barbados. It is similar to a Company in that it is a separate legal entity from its members and has the capacity, rights, powers, and privileges of an individual. An SRL however, can exist for no more than 50 years, and it is allowed to be classified as exempt from special tax concessions.

Advantages

1. Separate legal entity - When an SRL is organised it exists as a separate legal entity from its owners or members.

2. Limited liability protection - With an SRL, the liability of the owners or members is limited to the amount invested in the SRL.

3. Limited Liability means that the owners or members are usually not personally responsible for the SRL’s debts. 

4. Attractive tax rate - SRLs in Barbados are currently taxed at a rate of 5.5% on taxable corporate income up to 1 million Barbados dollars. 

5. Ability to raise funds without increasing debt - A SRL is a suitable structure to attract investors. Quotas in the SRL can be sold to investors to raise money to fund the operations of the SRL.

6. Eligible for tax treaty benefits. An SRL is eligible for certain tax treaty benefits and concessions.

Disadvantages

1. Cost of Setup - A SRL is more expensive to set up than a  Registered Business Name or Partnership.

2. Disclosure and compliance requirements - A SRL is required to disclose more information to regulators than other business types. SRLs also have more compliance requirements than other business types. For example, SRLs are required to file certain documents at the Corporate Affairs and Intellectual Property Office on an annual basis, and information related to the structure of the SRL must be contained in these documents.

3. Shared ownership and profits - If an SRL has more than 1 owner or member the ownership is shared between each owner or member. Further, the profits, in the form of distributions of the SRL are split between the owners or members in accordance with what is agreed by the owners or members.

4. Limited lifespan. SRLs only have a lifespan of up to 50 years.

Partnerships

A Partnership is an entity whereby one or more persons form an entity under which they conduct their business. There are two main types of Partnerships; a Limited Liability Partnership and a General Partnership.

Limited Liability Partnership:

A Limited Liability Partnership is a partnership that includes limited partners who invest capital into the entity but are not liable for the debts or obligations of the entity.

General Partnership:

A general partnership is a partnership with only general partners, who are all liable for the debts and obligations of the entity.

Advantages

1. Less record keeping and compliance requirements. There are fewer record-keeping, reporting, and compliance requirements for a Partnership when compared to a Company or SRL.

2. Ease and affordability. Establishing a partnership is easier and cheaper than some other types of business entities.

3. Limited liability. In a Limited Liability Partnership, limited partners are not liable for the debts or obligations of the entity. 

4. Control of the Partnership. In a General Partnership, the partners controlled and own the partnership without interference from the owners or investors.

Disadvantages

1. No limited liability. In a General Partnership, there is no limited liability, the partners are directly liable for the debts and liabilities of the entity. 

2. Lack of control of lifespan.  Unless provisions are made by partners, a partnership can be dissolved by the resignation or death of a partner.

3. No ownership or property or contracts. Partnerships are restricted from owning property or entering into contracts.