Why set up your own Business?
For many the dream of owning their own business is a way to control their own destiny, both financially and personally.
As an employee, annual salaries can be determined with limited opportunity to earn more money from a specific job. Starting your own business gives you the potential to earn a high salary, with independence, flexibility, power and personal fulfilment. Owning your own business not only allows you to create and control all productivity, pricing and marketing plans, but also gives you the freedom of deciding what, when and who, you do business with.
Furthermore, for any long term unemployed individuals ( 12+ months) who sets up a business between 25th October 2013 – 31st December 2016, an exemption from Income Tax up to a maximum of €40,000 per annum for a period of two years can be obtained.
How do I set up a Business?
Business Start-up Solutions can take the form as a Sole Trader, Partnership or Personal Limited Company. In helping determine the best start-up solution for your business, factors include Estimated Turnover, Capital Investment, Future Business Development and Tax Planning can play an important part.
Where it is considered that your business will maintain a relatively low turnover, and/or all of the income generated by the business will be needed to live on, it is often best to operate as a sole trader or partnership rather than a Personal Limited Company.
The set up and operational costs of Sole Trader are often less expensive than that of a Personal Limited Company. However, if your business requires capital investment i.e. equipment or stock, limited liability can play an important role to protect your personal assets. As a Sole Trader you are personally responsible for the debts and liabilities of the business, however operating your business through a Personal Limited Company, shareholder / directors assets cannot be seized to pay off Company debts.
What taxes need to be registered for a new Business?
The taxation of a business depends on total income earned, business expenses incurred, and profits made during a financial year. Depending on the type of business structure used, registration requirements can include Income Tax, VAT, Corporation Tax (CT) and Relevant Contract Tax (RCT).
What Business Expenses are permitted?
An allowable expense is an expense which is wholly, exclusively and necessarily required for the performance of the duties of the business. Allowable expenses do not cover, Personal Expenses or Non-Business related Expenses. Depending on the structure of the business, a difference in allowable business expenses may apply.
The table below outlines the difference between operating your Business as a Sole Trader and Personal Limited Company; however for further information and tailored advise on New Business Start-Ups, please contact our office 01 8077106
| Sole Trader | Personal Limited Company | |
|---|---|---|
| Set Up Costs | Company Incorporation not required Administrative costs to set up with Revenue | Company Incorporation (Icon Clients €229 + VAT ) Administrative costs to set up with Revenue |
| Annual Return Fee | Nil | Company Registration Office Online Return- €20 |
| Annual Returns | Income Tax Return – Form 11 Return to Revenue via Self-Assessment System | CT 1 Return ( Corporation Tax) B1 Return ( Company Registration Office Form 11 – Directors Return |
| Tax Rates | Single – 20% Tax €33,800 Balance @ 40% Married One Income – 20% Tax €42,800 Balance @ 40% Note : Not entitled to PAYE Tax Credit | Corporation Tax Rate @ 12.5 % Director Salary at PAYE level Note : Not entitled to PAYE Tax Credit |
| PRSI ( Public Related Social Insurance) Rates | 4% with a minimum of €500 Employing Employee – 10.75% | Director PRSI at 4% Employing Employee – 10.75% |
| Business Expenses | All business expenses must be fully receipted | Tax Allowable Business Expenses Employee Travel/ Subsistence/Accommodation claims as per Revenue Guidelines |
| Employer | As a single Sole Trader there is no requirement to register as an employee | Directors of the Personal Limited Company are considered employees of the Company P30 / P35 must be filed |
| Liability for Debts | Unlimited Liability – Personally responsible for the debts and liabilities of the business | Personal assets of the Directors cannot be cannot be seized to pay off company debts |
| Access to Business Accounts | Not Visable to Public | Summary Accounts accessed via Company Registration Office |
| Succession/ Cessation of Business | Business ceases with the death of owner | Business can be passed / sold on Option of Liquidation / Voluntary Strike Off / Involuntary Strike Off. |
| Cessation of Business | Free to cease the business with Revenue | €350 + VAT Voluntary Strike off |
Claire Fagan
15th January 2015
