Guide to setting up a company in Ireland

Setting up a business ireland
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There has really never been a better time to start your own business. Thanks to Government initiatives, start-up communities and entrepreneur networks there is a vast amount of information available to surf your way through.

Places such as your Local Enterprise Office (LEO) have developed courses, programmes along with grants and advise to take you from the ideas board to having your product on the shelf, you no longer need to have a background in business to set up your own, you can just learn as you go.

Think carefully about ceasing to be someone else’s employee. Certainty of income, both in terms of quantity and regularity, disappears, whilst fixed outgoings, such as mortgage repayments, remain. Similarly, other benefits of employment may be lost, such as life assurance cover, a company pension, medical insurance, a company car, regular hours and holidays.

Success in business depends on many factors; most important is the need to critically review all aspects of the business proposition before progressing too far. The below points, highlights many of the practical points that require consideration before trading begins.

1. Selecting a Legal Entity for your Business:

Sole Proprietorship
A sole proprietorship is typically a business owned and operated by one individual.  A sole proprietorship is not considered to be a separate legal entity under the law, but rather is an extension of the individual who owns it.  The owner has possession of the business assets and is directly responsible for the debts and other liabilities incurred by the business.  The profit or loss of a sole proprietorship is combined with the other income of an individual for income tax purposes.

Partnership
In a partnership, two or more individuals join together to run the business enterprise.  Each of the individual partners has ownership of company assets and responsibility for liabilities, as well as authority in running the business.  The authority of the partners, and the way in which profits or losses are to be shared, can be modified by the partnership agreement.  The responsibility for liabilities can also be modified by agreement among the partners, but partnership creditors typically have recourse to the personal assets of each of the partners for settlement of partnership debts.

Limited Company
A limited company is a separate legal entity that exists under the authority granted by the Companies Acts.   A limited company has substantially all of the legal rights of an individual and is responsible for its own debts. It must also file tax returns and pay taxes on income it derives from its operations.  Typically, the owners or shareholders of a limited company are protected from the liabilities of the business.  However, when a limited company is small, creditors often require personal guarantees of the principal owners before extending credit.  The legal protection afforded the owners of a limited company can be useful.  A limited company must file accounts at the Companies Registration Office.

2. Registering with CRO and Revenue

You should advise the Revenue when you start a business as a self-employed person/sole trader. You must do this online using the Revenue Online Service – ROS,  through the online eRegistration Service if you are:

· An individual who is currently registered for PAYE Anytime;
· An individual who is currently registered for Revenue’s Online Service – ROS
· Represented by an Agent.

ROS is Revenue’s internet facility which provides you with a quick and secure facility to register for tax, pay tax liabilities, file tax returns, access your tax details and claim repayments.  The facilities are available 365 days a year.  You will also benefit from an extension to existing deadlines for paying tax and filing returns where you both pay and file using ROS.  Further information on Revenue’s online service can be found at www.revenue.ie

3. Accounting & Bookkeeping

Most owners of a new and growing business have a flair for the environment in which the business operates.  They may be a great salesperson, an outstanding mechanic, carpenter, solicitor, or inventor.  Unfortunately, most people don’t like to keep the books.  As an owner of a business you must remember that your company’s books and financial statements represent a score sheet which tells how you are progressing, as well as an early warning system which lets you know when and why the business may be going amiss.

Financial statements and the underlying records will provide the basis for many decisions made by outsiders such as banks, landlords, potential investors, and trade creditors as well as taxing authorities and other governing bodies.  The necessity for good, well-organised financial records cannot be over-emphasised.  One of the greatest mistakes made by owners of small businesses is not keeping good financial records and making improper or poor business decisions based on inadequate information.

Shop around for a good and affordable accountant along with a good accounting system.

4. Value Added Tax

VAT registration is necessary if the annual business turnover (excluding VAT) is likely to exceed the following annual limits:

€75,000 in respect of supplying goods
And
€37,500 in respect of supplying services

Registration may also be necessary if you are in receipt of taxable services from abroad or if you are a foreign trader doing business in the State.

VAT Rates:
The standard rate is 23% but there are reduced rates of 13.5% and 9% for tourism related activities and 4.8% specifically for agriculture. The 13.5% rate applies to certain fuels, building and building services, certain newspapers etc. Some goods and service are zero rated – no VAT and some are exempt from VAT. Suppliers of goods and services exempt from VAT are not entitled to register for VAT unless they also make taxable supplies.

5. Payroll Taxes

The Revenue Commissioners have a very useful section online at revenue.ie, on an Employers Guide to PAYE/PRSI.  Not only do you collect and remit PAYE to the Revenue Commissioners, you also operate the PRSI scheme.

6. Income Tax and Corporation Tax

In order to register for tax you must have a Companies Registration Office (CRO) number issued by the CRO.

When you start a new company, you or your tax agent must inform Revenue. If your company is represented by a tax agent, he or she must submit an online registration application on your behalf through Revenue Online Service (ROS)

If your company is not represented by a tax agent, you must submit one of the following forms to us:

If you submit a paper application when you should have submitted an online application, it will not be processed. The paper copy will be returned to you with an instruction to complete the registration process through ROS.

The TR2 forms can be used to register for:

Once your company has been registered, you must file all payments and returns online through ROS.

You will be given a new Tax Reference Number to use when trading and filing your tax returns.

7. Financing your Business

Many start-ups assume that all they need is enough money to rent office space, buy equipment, stock inventory and bring customers in. They often forget that capital is also needed to pay salaries, electricity bills, insurance, legal fees and other overheads before the business ever makes a profit. Furthermore, if you sell your products on credit, the time between making the sale and getting paid can be months.

Whether you get money from investors, as a loan from the bank, or through a start-up programme it’s important to have enough to get to the next step. Everything takes longer and costs more when starting a business.

Consider a plan for that. Don’t be over optimistic on revenues and time scales. It might be costly but it’s important to get the legalities, contracts, intellectual property etc correct from the start.

There is ample advice that you can avail from on how to set up you own business online but if you feel that your still unsure if you are more innovator than business owner, contact your Local Enterprise Office and enrol on their start-your-own-business programmes – you never know where it might lead you.

Useful contacts:

ISME
Small Firms Association
Chamber of Commerce
Company Registration Office
Revenue
Local Enterprise Office
MicroFinance Ireland
Enterprise Ireland
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