Pioneering research on the problems and special issues faced by family-owned businesses in Cyprus is to be presented at a meeting being held on December 6, it has been announced.

The 'Cyprus Family Business: Problems, Challenges, Prospects' event is co-hosted by the Cyprus Chamber of Commerce and Industry (CCCI) and the Cyprus International Institute of Management (CIIM), and sponsored by the Bank of Cyprus.

The results of research conducted in April and May of this year will be showcased, with a panel discussion and networking event to follow.

The Chamber of Commerce and Industry observed in late November, ahead of the event, that the research was the first to have been undertaken using such a broad sample (with more than 200 family businesses having participated), and that the results would allow reliable conclusions to be drawn regarding the situation currently facing such organisations in Cyprus.

In terms of the structure of family-owned businesses in Cyprus, the attractive tax rates in Cyprus may determine what form to adopt ; with a flat rate of corporate tax of 10%, compared with a 30% personal income tax rate on income over EUR36,000, tax is a factor which may strongly influence any decision, although it is worth bearing in mind that incorporated entities face much more in the way of bureaucracy and reporting.

However, a sole proprietor takes all of the risks of a business so is exposed in the event of business failure, and is liable for the debts of the business. With a partnership, the risks are shared between the partners and a partnership agreement can stipulate virtually anything that the partners agree relating to the business. There is no reason why a husband and wife or parent and sibling cannot be in business as partners. Each partner has responsibility for his or her own tax affairs, being subject to personal income tax on their share of the profits.

Where a limited company has been set up, the profits of the business entity will be subject to the low rate of corporate tax – 10%. The directors of the company will be liable for their own tax at personal income tax rates. A limited company gives the option to issue dividends to shareholders.

It is possible to employ a spouse within a small business, or for them to work in a self-employed capacity, or to be a company director within a limited company, or a partner in a partnership. The relatively favourable tax treatment of dividends in Cyprus (when compared to the personal income tax rate of 30%) may mean that the company director route may be the way to go, where this suits the business form. However, professional advice is recommended in this regard.