The start-up from a legal perspective

Starting a new business can be hectic for the entrepreneur, especially when having to look at the new enterprise from a legal perspective. There is a plethora of matters to be considered so here is a list and an explanation of the most common legal matters.

Buying the shares of an existing company?

When buying an existing company and entering into a Share Purchase Agreement, there are several factors to consider, besides the purchase price. These include the legal standing of the company, the shares’ ownership and whether the company is involved in any litigation or dispute, to mention a few.

Usually the company which will be bought owns and operates a business. Again, there are factors to consider in relation to the business, such as, the licenses, the employees and the intellectual property, among other things.

Incorporating a company or working as an individual?

To decide which option is adequate, there are a few considerations including the expected turnover, the initial available capital and the type of business.

It is important to know that a company is a separate legal person from its shareholder (founder). It can enter into agreements, hold property and handle its money and all its property is distinct and separate from the personal property of the founder. If the unfortunate event of the company’s insolvency, the creditors can only go after the company’s property and not the founder’s property. Similarly, the insolvency of the founder (or one of them) will not affect the company and the business.

From a tax position, there is a 12.5% tax on company’s profits however an individual is taxed based on a scale.

Shareholder’s agreement

If the new enterprise is the work of partners, a shareholder’s agreement, is the agreement between the partners. It sets the ground rules for their cooperation and the operation of their business.

Licensing

Certain businesses such as travel agents and insurance brokers require permits and licenses for their operation.

Intellectual Property

According to Cyprus law, some intellectual property rights need not be registered to be protected. These include copyright to literary works and computer programs.

On the contrary, trade – marks and patents must be registered with the Intellectual & Industrial Property Department. To name benefits of registering intellectual property: it gives the right to the registered owner to use the IP and adds value to the business.

Human Resource

If you will employ personnel, then you need to agree the terms of employment, prepare employment agreements and register the employer and the employee with the Social Insurance.

Renting or buying immovable property?

You will need to enter into either a rental agreement or an agreement for the purchase of immovable property. In the agreements your rights and obligations will be clearly mentioned, and your interests will be safeguarded.

The above serves as a starting point and are by no means conclusive. Other specific legislation may affect your line of business. Our firm can give tailored advice on all matters mentioned above, as well as prepare all necessary agreements.

Disclaimer

This article provides general information and does not constitute legal advice. For further information contact a member of our team at [email protected] or call us on 25 107587.

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