Have you been contracting for some time, are now considering a career as an independent professional and want to learn about how you can set yourself up for success? Why not invest in your future and establish your own business. The question is… is it the right move for you now? As with every decision, it’s important to know the facts, the figures and the opportunities before making your next career move.
Keep reading to understand the process of setting up your own personal limited company further, along with some of the benefits which you can enjoy if you do decide to make the switch!
What is a Personal Limited Company?
A Personal Limited Company is a legal entity separate from its individual shareholder and director, where the shareholder is only responsible for the debts and liabilities of the company to the extent of their unpaid share capital. Contractors can act as the sole shareholder of this entity, granting them complete autonomy and flexibility to manage their business income. This setup allows business owners to accumulate funds in their company over a span of years and operate in the most tax-efficient manner possible.
Why invest in a Personal Limited Company?
Operating through your own Personal Limited Company has numerous perks with many being pivotal to your business success, including but not limited to, the ability to process business expenses or company assets, the ability to pursue multiple business interest, hiring staff, and most commonly, the increased capacity for pay retention, tax efficiency and long-term financial success.
Many self-employed professionals choose to set up a Personal Limited company to purchase high-value business expenses or assets required for their contract work. As long as the expenses are in line with business requirements and your contract, Revenue considers them allowable business expenses. If you're interested in purchasing assets, we can arrange a consultation with an expert advisor who can provide specific details for your situation.
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.
Whether that is to invest in cryptocurrency or to sell products through an e-commerce platform, many independent professionals use their extra time as a way of providing multiple streams of income.
Employing an additional individual through a personal limited company, or a family member or spouse, to assist with administrative, marketing, or general business duties can be an efficient way to gain more time to focus on core responsibilities and on what you do best. It's important to note that the salary paid should align with the duties carried out by the new employee in order to be justifiable to the Revenue Commissioner.
Retain more of your Income through Long Term Financial Planning
Retaining company profits can create various possibilities and opportunities for company directors. Many clients opt to take a reduced salary to avoid higher income tax rates and invest the retained profits elsewhere. Proper long-term financial planning, including taking advantage of entrepreneurial relief, can significantly reduce tax liabilities. It's important to discuss your plans with an advisor to find the best solution for your specific circumstances, as accounting is not a one-size-fits-all approach.
Ultimate Flexibility and Control
Having complete control over your business income and the ability to store funds in your company account provides you with the flexibility to receive an income even when taking a break from contract work. For instance, many company owners which work with Icon Accounting, opt to receive a lower salary on a monthly basis than the income received into the company account. This enables them to take time off for a well-deserved break, spend time with their family, or focus on enhancing their skills, while still being able to process payroll from the funds stored in the account.
What to consider when setting up under my own Limited Company?
- There is a once off fee of €229+VAT for the incorporation and tax registration of a Personal Limited Company, plus a separate €20 (non-vatable) fee for your B1 submission.
- The name of your Company must be unique and clearly distinguishable from all other Irish Registered Companies. Our team will be on hand to help you with this!
- A Registered Office is required for a Personal Limited Company, which must be located in the Republic of Ireland. This address can be your residential address.
- Unlike the umbrella solutions, there is a requirement to set-up a Business Bank Account. It must be a Private Limited Company account as per Revenue compliance.
- If opening a company limited by shares, you can act as the sole director if you wish, however, you will need to appoint a second individual to act as the company secretary.
- Despite the current 10-12-week turnaround time that is associated with a complete company incorporation including VAT registration, depending on your requirements, you could have the certificate of incorporation for your very own private limited company within 5-7 working days.