Has your Idea of working for yourself been worked through in your mind - Now you are ready - take a deep breath and Jump.
January 30, 2018
Setting up your own limited company is a big step. And though it’s highly rewarding, there are also a number of things to consider before making that leap of fate.
There are two main options open to entrepreneurs setting up in Ireland – sole trader or limited company.
To help you to prepare for when the time comes, we’ve put together some of the limited Company option - questions, pitfalls and reasons for choice - you should consider.
Is there a demand for product or services in your industry?
Whether you’re new to business or you’ve previously worked in the business for another company under the PAYE system, starting out under your own company will give you more freedom when it comes to achieving your goals. In addition you will have the confidence, from your research, that there is a growing demand for what you are offering.
Before you go limited you will have made sure in your own mind that there are enough opportunities in your industry for another player.
Do you have a name for your limited company?
Establishing your company means that you will need a trading name. Your company name must be unique, inoffensive and should not make false statements about what you do. As this name will represent you as a contractor, it is worth spending some time to find the right name.
Have you considered legal protection?
Owning a business comes with a number of risks. However, with the right preparation, you can ensure you have protection should you ever need it.
If you’re thinking of going limited, it’s a good idea to decide what kind of business protection you will need.
Are you prepared for the financial and taxation responsibilities?
As a limited company director, it will be your responsibility to pay Staff, Suppliers and Revenue. You will also need to maintain accounting records and file your accounts at the end of each financial year.
Enlisting the help of an accountant who understands the unique requirements of your business can help to save you time and make your workload easier, especially in the early stages of your start-up.
Company Structure of Choice.
A company structure does require more accounting and tax work but the additional fees involved should be more than covered by the tax savings in running the business through a company.
A company also provides a structure for introducing additional investors, giving shares to key employees or family members and selling shares in the business.
Company Pitfall #1.
Company directors need to be mindful that the money in the company’s bank accounts are not their personal funds. Directors should only withdraw money from the company as part of a salary, dividend, reimbursement for motor and travel expenses or repayment of a loan given to the company. Any payments in excess of these could contravene the Companies Act 2014 and trigger a tax liability.
Company Pitfall #2.
Remember that most directors need to also submit an Income Tax return even if their only income is a salary from the company. Surcharges and penalties can result for non-submission of Income Tax returns even if all the tax has been paid through the company payroll.
Deciding on the legal Structure.
Some issues to consider when making a decision on legal structure, are:-
- Will the business make sufficient profits to justify the additional expense of running the business through a company?
- Is a company structure required for a grant application or is there a potential investor in the wings?
- Are you willing to deal with the paperwork associated with the business in a timely manner or will you outsource/delegate this to someone else?
- Is there a good marketing reason to trade through a company rather than as a sole trader?
- Do you want to protect the business name by registering a company?
- Do you accept that the company’s accounts will be filed on public record at the CRO (although these will be abridged for small companies)?
- Is limited liability important in your industry sector?
Starting a New Company this year...Call us... we can Help
We at JOHN M. SHANAHAN & CO. are here to help you with all your Statutory Accounting, Business, Financial and Taxation requirements, by providing expert, specialist and professional service tailored to meet your needs.