Thomas McGibney & Company

 Chartered Accountants & Registered Auditors

 Main Street, Virginia, Co. Cavan.   Phone 049 8549966  


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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 

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.

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

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.

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.  

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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:

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.

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.  

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Registering for Tax

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
Form TR2 – for companies

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)  

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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

·       €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.  

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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 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.                                             

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Tax Saving Tips
Starting a New Business
Tax Reliefs
Self Assessment Tax
Sub Contractors Tax Guide
Rental Income & Tax
Benefit In Kind
Expenses for Employees
Rural Renewal Scheme
Budget 2003
Budget 2002


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!

     

Thomas McGibney & Company

Chartered Accountants  & Registered Auditors

Phone / Fax

049 8549966