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Starting a New Business - Our Guide

We specialise in advising individuals who are setting up new businesses.

If you are starting a business, or considering doing so, we hope that the you find the following information useful. 

We recommend that you seek appropriate professional advice before making decisions.

Self-Employed or Company?     Opening a Bank Account 

Registering for Tax     VAT Registration      

Companies PAYE/PRSI      Tax Numbers

Should I set-up as Self-Employed or use a Company? 

Before you set up a new business, you should consider carefully whether to trade using a company or under your own personal identity.

Once a company is registered it is a separate legal entity from the persons who formed it.

Incorporation of your new business as a company can bring some very important advantages for you and your business. Among these are:  

1. The opportunities presented by the very low 12.5% rate of Corporation Tax in Ireland . This compares very well with the current combined high rate of over 50% for income tax, PRSI and levies for self-employed taxpayers.  

2. The low rate of Corporation Tax can allow a company to accumulate wealth in a very tax-efficient manner.  

   This is especially relevant if substantial sums are being borrowed to finance investment. 

   For example, an individual (paying tax at the top rate) will have to earn over €100,000 gross income (over and above personal living expenses and drawings) to make €50,000 net in loan repayments in a given year. 

   This is because over €50,000 income tax & PRSI will arise on the income, leaving only €50,000 remaining to pay the bank.  

   A company in the same situation will only have to raise approx €57,000 in additional income to make repayments of €50,000. This is because only €7,000 Corporation Tax will apply on the €57,000 income. 

3. There are very favourable provisions for tax relief on directors’ pensions. You can only avail of these if you use a limited company.

4. The availability (in some cases) of the Seed Capital Scheme. Under this Scheme an employee, who leaves employment and invests in a newly-trading company, may be entitled to claim refunds of income tax paid in previous years. 

5. Limited liability - The liability of company directors and shareholders in relation to the business of their company is restricted to their investment in the company. It is worth noting that limited liability protection may not apply in certain circumstances.

6. A limited company identity can often, of itself, lend a certain prestige to a new or growing business. 

On the other hand, you should consider the following matters before deciding to incorporate your business:

1. The Companies Acts impose strict obligations on company directors to comply with Company Law. 

2. This places important responsibilties on directors to ensure that company affairs are conducted in a proper manner and that returns are made correctly and on time to the Companies Office.  

3. The possible need for an annual company audit.  Most small companies can now avail of audit exemption, subject to certain terms and conditions.  

4. Potential future tax planning difficulties in accessing company funds for personal use.   

5. If a company owns property, there may be additional tax complications if the property is sold and the company shareholders need to access the sale proceeds for personal use.

6. The cost of liquidation and/or winding up of a company that has ceased to trade.  

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Opening a Bank Account  

It is extremely advisable to open a separate bank account for each new business venture. This will be invaluable to you in the long term, especially in easing the burden of keeping proper books and records.

You should ask your bank for the required application forms in good time before you need to operate the new account.

In addition to the usual requirements regarding personal ID, etc, the bank will normally require the following documents from you:  

You can register a Business Name before you start trading, or for an existing business.  

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Registering for Tax

When you set up a new business you must advise Revenue, by completing a Registration Form.

You can download this form here. The various Registration Forms are as follows:  

These forms can be used to register for any or all of the following:  

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VAT Registration

You must register for VAT if you operate in certain business sectors or if your turnover is likely to exceed the specified registration limits.

These are  

Many new businesses pay significant VAT on goods and services purchased during the start-up process. In order to reclaim any element of this VAT, you must be VAT-registered before the invoice date of any such goods and services purchased.  

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Companies PAYE/PRSI

If you set up a company, the company must register as an employer and operate PAYE/PRSI on the pay of directors even if there are no other employees

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Tax Numbers

The Revenue will normally notify you of your Tax Registration number(s) within a few weeks after the Registration Form is sent to them.

Normally, self-employed individuals are allocated their existing PPS numbers, for income tax, VAT & PAYE/PRSI. However you should not assume that this will be automatically the case.

If you set up a company the company will be given a separate registration number. As a director of the company, you will retain your own PPS number for your personal tax affairs.                                             

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For a simple explanation of how the Self Assessment system works, please refer to our Self-Assessment Guide

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