Different types of business entities are defined in the legal systems of various countries. In Gibraltar, these range from Sole Traders and Partnerships to Companies and Trusts, as well as various other specialised types of structures. A description of the most common types follows.
Becoming a sole trader is the simplest way to get started in business. It is the most basic form of business structure and it is also relatively easy and inexpensive to start and maintain.
In this type of structure, two or more individuals or entities agree to share the risks, costs and responsibilities of being in business. Each partner is self-employed and takes a set portion of any profits the business makes. Partners typically contribute finance, time and skills, share in the decision-making and are personally responsible for any debts.
Unlike in a limited company set-up, a partnership has no legal existence distinct from the partners themselves. If a partner leaves, dies or goes bankrupt, the partnership must be dissolved. The business, nonetheless, can still continue to exist.
A partnership thus offers a relatively simple and flexible option for two or more people to own and run a business together. However, partners do not enjoy any protection if the business fails.
A limited liability partnership (LLP) is comparable to an ordinary partnership in that a number of individuals or Limited Companies share in the risks, costs, responsibilities and profits of the business.
In accordance with the Companies Act 1930, companies are required to be incorporated in Gibraltar as:
The Protected Cell Companies Act provides for a protected cell company (PCC) to create one or more cells for the purpose of segregating and protecting cellular assets. As a result, the rights of creditors would be limited to the assets of the cell of which they are creditors.
The PCC may, in respect of any of its cells, create and issue shares (the cell shares) the proceeds of which (the cell share capital) are comprised of the cellular assets attributable to the cell in respect of which the cell shares were issued. A PCC may also pay a dividend on individual cells (a cellular dividend), subject to available profits, and by reference to the assets and liabilities of the cell.
A company may be incorporated as a PCC or converted, if permitted by its Articles, into a PCC. The name of the company would include reference to its PCC status and each cell must have its own distinct name or designation.
Insurance companies and collective investment schemes require the consent and approval of the Financial Services Commission before operating as a PCC. An annual licence fee of £3000, plus £1000 per cell, is currently payable to the Financial Services Commission.
In common law legal systems, a trust is a relationship in which a person or entity (the trustee) holds legal title to certain property (the trust property or trust corpus), though it is bound by a fiduciary duty to exercise that legal control for the benefit of one or more individuals or organisations (the beneficiary), who hold beneficial or equitable title.
A non-profit making organisation (also known as a ‘not for profit’ organisation) is the name given to a legal entity that does not accrue money purely for profit or personal gain. Examples of such organisations include:
A non-profit making organisation can be setup as a trust, company or in even by an incorporated association, as is the case with a registered charity. In Gibraltar, a charity is registered with the Charity Commissioner at the Supreme Court. One of the advantages of registering as a charitable organisation comprises that is exempt from paying certain taxes once certified. It is also possible to set up a charity to create awareness for a particular cause as well as to use it a vehicle to fund an activity. Trusts and bodies partly established for charitable purposes are likewise from time to time considered as, or treated as, charities.