Embarking on a career as a contractor offers exciting prospects, providing flexibility and autonomy to independent professionals. However, one crucial decision you'll face is selecting the appropriate company setup for your contracting work. With various options available, each with its advantages, it's vital to understand the implications of each structure. In this comprehensive guide, we will explore the considerations you should bear in mind when starting a contract role or reviewing your current structure. We'll also provide insights into the different company solutions available, highlighting their pros, cons, and how they can be the perfect fit for your contracting needs.
Considerations for Choosing the Right Structure:
When contemplating what company solution fits your needs, several key considerations come into play:
Start Date and Set-Up Timeframe:
Consider the start date of your upcoming contract and the time required to finalize the company setup. Umbrella solutions, such as our PAYE Umbrella Company or Director Umbrella Company, offer immediate set-up, making them ideal for those needing an immediate set-up for contracts to begin. For those with more time on their side, establishing a Personal Limited Company will be an option. Of course, you can also decide to make the switch in your company structure at any stage throughout your contract role too!
Duration of the Contract:
Contract durations can vary significantly, as they do depend on the client and the project requirements. Timeframes can generally range from a few months to potentially years. For professionals that initially have short term contracts, the umbrella solutions are the solutions we recommend as it will mean no set-up time or cost associated with the set-up. Meanwhile, with professionals which have long-term contracts, they can benefit from having their own Personal Limited Company and it in operation over a number of years.
Each company structure has different tax implications and tax rates to pay. We always suggest consulting with our tax advisors first to understand how your choice may impact your tax obligations and potential savings. With our PAYE Umbrella Company solution, you will pay Class A PRSI, with our Director Umbrella solution, you will pay Class S PRSI on payroll processed and with our Personal Limited Company, you will similarly pay Class S PRSI, but will have flexibility on how you company funds are processed.
Business Expenses and Company Assets:
Another aspect to bear in mind is the costs that you incur for the contract work, or if you wish to purchase high value assets under a Limited Company structure whilst contracting. For example, if you will need to purchase business equipment such as a laptop or mobile phone, this is feasible under our Director Umbrella Company or Personal Limited Company solution. And for those looking to purchase that new vehicle, the purchase of high value assets is only feasible through operating via your own personal limited company. Given that costs associated to a contract will be determined by the project or work requirements, our dedicated team will be happy to discuss and clarify the solution to fit you needs from the business expenses or costs you may have.
Assess your long-term career goals and whether you plan to continue contracting. If you foresee contracting as a long-term option, establishing your own Personal Limited Company and investing in your contract brand can be a worthwhile endeavour.
Multiple Clients or Business Interests:
For many independent professionals, being self-employed allows for increased earning potential and career autonomy, which provides an opportunity for contractors to build a client base across their industry, or other industries, and explore company expansion through other business interests. For those considering investments or multiple streams of income, operating through your own Personal Limited Company provides the ideal framework to facilitate this.
Administrative Requirements and Support:
Take into account the administrative obligations associated with each structure, along with the level of support and control which you want to have as a contractor. Understand the paperwork, reporting obligations, and related costs involved. For example, with the Personal Limited Company, you will be required to open a business bank account and liaise with your account manager for organisation of the company account. In addition, you have complete autonomy to decide your involvement in tasks associated with the company through our different offerings available, and whether you want to take a hands-on approach or receive a fully managed service. With both the Umbrella Company solutions, this can be an ideal option for professionals who want to build their experience in the contracting process prior to establishing their own company, as we will manage the company bank account and simply process your payroll once funds are received by the client. In saying the above and the most important factor to note, is that you will always have the support of Icon Accounting and your dedicated account manager throughout every stage of the process, regardless of the company structure that you take!
Exploring the Company Solutions:
Now, let's delve into the different company solutions on offer for contractors:
PAYE Umbrella Company:
A PAYE Umbrella Company is a Limited Company solution serving as an intermediary between you and the client of your contract work. It ensures immediate set-up, maintains Class A PRSI status for contractors which means they will make Illness Benefit contributions, and simplifies administrative responsibilities. As it is the responsibility of the Umbrella Company to manage all invoicing, payroll and tax compliancy on your behalf, you can leave all the admin concerns to us and focus on what you do best; your contract work! Suitable for short-term contracts, and candidates that want to retain Class A PRSI, this solution offers a simple, hassle-free process with no tax returns to be completed either. Under the PAYE Umbrella Company, we will ensure you receive all entitlements with business expenses, however, you may experience limited flexibility in what you can claim under this solution.
Director Umbrella Company:
Similar to the PAYE Umbrella solution, the Director Umbrella Company is another Limited Company structure which acts an intermediary between you and your client. This ready-made Limited Company option allows contractors to become a director without the set-up costs and time associated with a Personal Limited Company. Operating as a Director maximizes tax efficiency with Class S PRSI contributions, while administrative tasks are handled by Icon Accounting. This solution is ideal if you're uncertain about the contract duration and you incur expenses, particularly relocation or business equipment related to your contract role.
Personal Limited Company:
Considering Contracting as a career choice? Why not invest in your future! Setting up your own Personal Limited Company provides the ultimate flexibility and control over your contract funds, and you can still leverage our fully managed service and ongoing support from a dedicated account manager. This solution is best suited for contractors looking to maximize self-employment benefits, engage in long-term contracts, have multiple clients, employ others, have significant business expenses or want to purchase assets. While the incorporation and tax registration process may take some time, the long-term advantages make it a compelling choice.
Choosing the right company setup for your contracting work is a crucial decision that impacts various aspects of your business and future. By considering factors such as contract details, expenses, tax implications along with your own personal development and career growth plans, you are set to make an informed choice on your contracting future! With the right company structure in place, you can establish a solid foundation for your contracting career, paving the way for growth, success, and peace of mind.
At Icon Accounting, we're here to help you navigate the world of contracting and find the perfect solution to fit your needs. Contact our team of experts today on 01-8077106 and email@example.com, and embark on your contracting journey with confidence.