The sole trader

People can choose from several different structures for running their business. The most common are a sole trader, a partnership and a company.

Typically, a sole trader is a smaller business, like a shop or a market stall.  In Solomon Islands, these people usually just register a business name and obtain any other licence required by the city council or provincial government.  If you register a business name, you are not registering a company.

The Partnership

A partnership is where two or more people contribute their own resources- cash, or property, or even their time.  They then have an agreement about how they share the profits between them.  A partnership is usually used by professionals, like accountants and lawyers.

The Company

Around the world, the most popular business structure is a company.  A company is a separate legal entity from the owners, who are called shareholders. The significance of this separation is that in most cases, shareholders cannot be personally liable for the debts of the company. If the company fails, generally the only liability of the shareholder is the amount they have invested in the company to purchase their shares. This type of liability is called ‘limited liability’.  This is why a company name always has ‘limited’ or ‘ltd’ at the end of it’s name.

Another way to look at the separation is to see the company as a separate ‘person’ from its directors (who are responsible for running the company) and its shareholders. A company can do many of the same things as a person- such as own property, enter contracts, sue, and be sued. There is no separate legal ‘person’ for sole traders and partnerships.

Types of Companies in Solomon Islands

There are 4 types of companies in Solomon Islands.  The most common is a private company.  This is where there are less than 50 shareholders.  There are also public companies, where there are more than 50 shareholders, but these are uncommon in Solomon Islands.  A new type of company called a community company was introduced under the Companies Act 2009, and more details of this company are contained in a separate area called ‘What are Community Companies?‘.

Note | This information is intended as a guide only – it is not intended as legal advice. For more detailed information please refer to the legislation or seek legal advice.