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| Registered to
carry on audit work and authorised to carry on investment
business by the Institute of Chartered
Accountants in Ireland |
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Starting
a New Business - Our Guide
A
key element of our services is helping individuals who are setting
up new businesses. If you are in this category, we hope that the
following guide is useful to you. We recommend that you seek
appropriate professional advice before making all key decisions in
this area.
Self-Employed
or Company?
Opening a Bank
Account
Before you set up a new business, you
should consider carefully whether to trade using a company or under
your own personal identity.
Companies must be registered with the Companies Registration
Office, Dublin Castle, Dublin 2.
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:
 |
The
opportunities presented by the very low rates of Corporation Tax in Ireland
currently 12½%. These compare very well with the current combined high
rate of 47% for income tax, PRSI and levies for self-employed
taxpayers.
|
| The low rate of Corporation Tax can
allow wealth to grow within a company structure, 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 approx .94,000 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 approx
44,000 income tax & PRSI will arise on the 94,000
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.
|
Very
favourable provisions for tax relief on directors pensions
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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. We can supply you, on
request, with full details of this scheme. |
|
Limited liability which means
that 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. If in any
doubt on this topic, seek specific professional advice.
|
| 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:
|
The Companies Acts impose strict obligations on company directors
to comply with Company Law. 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.
|
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The need for an annual company audit. Many
small companies can now avail of audit exemption, subject to
certain terms and conditions.
|
|
Potential future tax planning difficulties
in accessing company funds for personal use.
|
| 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. |
| The cost of liquidation and/or winding up of
a company that has ceased to trade.
|
In order to make the right decision for
you, it is essential that you obtain appropriate professional advice
in this area. We can provide a full and expert service to you in
this area.
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:
| Certificate of Incorporation if you are
operating through a company
|
| Certificate of Registration of Business Name,
(if you will be trading using a Business Name), and a copy of
the application form for Registration of Busimess Name.
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We can arrange the Registration of
Business Name on your behalf, before you start trading, or if you
otherwise need a Business Name to be formally registered for an
existing business.
When you set up a new business it is
essential to advise the tax office. You
can do this by filling in a Registration Form, which is available
from us, on the internet at www.revenue.ie
, or from any tax office.
The various Registration
Forms are as follows:
| Form
STR for Irish-based small businesses (excluding companies)
with annual turnover less than 127,000
|
| Form
TR1 for all other non-incorporated businesses
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| Form
TR2 for companies
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This form can be used to register for any
or all of the following:
|
Income
Tax or Corporation Tax (if you are setting up a company)
|
|
PAYE/PRSI if you intend to employ staff
|
|
Value Added Tax (VAT)
|
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
·
50,790 if you will be supplying goods
·
25,395 if you will be supplying services
Most 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.
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
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 RSI 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 RSI number for your personal tax affairs.
|
 
| Self
Assessment For a
simple explanation of how the Self Assessment system
works, please refer to our Self-Assessment Guide |
| Look before
you Leap!
Please note that this guide
is for information purposes only and no responsibility can
be accepted for any errors or omissions. |
| We can
help!
If you need further
information, advice or guidance on starting a new
business, forming a company or arranging tax registration,
please contact McGibney & Company
today! |
|
