Sarting your own business can be one of the most exciting and fulfilling decisions someone can make in their lives.
The rewards can be substantial in terms of financial gain and self –esteem. Self – Employment requires Total Commitment, Physical and Mental Strength, Willingness to work long hours and Support from family and friends. Before starting your own business you should have identified a Market Opportunity, have the practical skills to do the job and have some business skills to enable you to run a business.
You can set up a business as a sole trader, as a partnership or as a limited company. The type of structure you choose depends on the kind of business you are running, with whom you will be doing business and your attitude to risk.
It is relatively simple to set up as a sole trader but if your business fails, your personal assets could be used to pay your creditors. Your main legal obligation is that you must register as a self-employed person with the Revenue Commissioners.
Partnership: This is where 2 or more people agree to run a business in partnership with each other. The partnership agreement should be drawn up by a solicitor. The partners are jointly responsible for running the business and if it fails all partners are jointly severally responsible for the debt.
If you set up your business as a limited company, the business is a separate legal entity. If the company gets into debt, the creditors generally only have a claim on the assets of the company. The company must be registered with The Companies Registration Office (CRO) and the company reports and accounts must be returned to the CRO each year. Bank Borrowings will more than likely be secured by a personal guarantee.
Many businesses operate under the names of their owners, others adopt a business name. However, if you adopt a business name other than your true surname (and christian names) or registered corporate name (in the case of a company) you must register the name under the Registration of Business Names Act 1963 with The Companies Registration Office (CRO).
If a business name is used, the Certificate of Registration must be displayed in a prominent position at all locations to which customers or suppliers have access.
Full and accurate records of your business transactions should be kept in full from the very start. Keeping accurate records helps you to evaluate the performance of your business, it is a legal obligation, accurate records are required to prepare and submit your tax return and your bank may require a copy of your accounts data.
A Vat registered person must keep full and true records of all business transactions which affect his or her liability to Vat and entitlement to deductibility. If you employ staff you are required to register as an employer and register for P.A.Y.E and P.R.S.I. As an employer you must maintain certain records such as hours worked, rate of pay, holiday and bank holiday entitlements and these can be inspected by the National Employment Rights Authority or the Revenue when requested.
If you have recently started a new business or are thinking about becoming self-employed please contact us today for a free no obligation consultation to discuss your requirements.
Companies Act 2014
The Companies Act 2014, which replaced the Companies Acts 1963-2013, came into effect on 1 June 2015. Under the Act, private companies limited by shares can be registered as an LTD (private company limited by shares) or a DAC (Designated Activity Company). You can read more about the requirements for different types of companies under the Companies Act 2014.
You can register your business name and file company returns online with the CRO using CORE (Companies Online Registration Environment).
Microfinance Ireland provides loans to small businesses with no more than 10 employees, including sole traders and start-ups. The loans of between €2,000 and €25,000 are for commercially viable proposals. Since September 2015, under the Microenterprise Loan Fund Scheme 2015, there is no longer a requirement to have been refused credit by the banks. Forms and details of how to apply are available on microfinance.ie.
JobsPlus is an employer incentive which encourages and rewards employers who employ jobseekers on the Live Register. JobsPlus has replaced the Revenue Job Assist and Employer Job (PRSI) Exemption Schemes.
Under the Trading Online Voucher Scheme vouchers of up to €2,500 may be available to businesses who demonstrate that they have a credible plan for trading online. Further details are available from your Local Enterprise Office.
Tax, PRSI and employing staff
How your business is taxed depends on whether it is incorporated as a company. If it is a company then it is liable for corporation tax. If your business is not incorporated you are considered to be a sole trader and you pay tax under the self-assessment system. Further information on tax is available in our document on tax for self-employed people and from Revenue.
Earned Income tax credit: In 2018, self-employed people can claim an Earned Income tax credit of €1,110.(increased from €550 in 2016 and €950 in 2017). It is also available for business owners or managers who are not eligible for a PAYE credit on their salary income. If a taxpayer also qualifies for the PAYE tax credit, the combined value of these 2 tax credits cannot exceed €1,650.
SURE tax refund: The Start Up Refunds for Entrepreneurs (SURE) is a tax refund scheme that allows eligible people to get a refund of up to 41% of the capital they invest in starting a business. Under the SURE scheme you may be entitled to a refund of PAYE income tax that you paid over the 6 years before the year in which you invest. You can read the Revenue guide IT15 for further details of the SURE scheme. You can use the online calculator on sure.gov.ie to estimate your potential refund.
Start-up companies: New companies may get tax relief on the first 3 years of corporation tax and the value of the relief will be linked to the amount of employers’ PRSI paid by a company in an accounting period subject to a maximum of €5,000 per employee. In the Finance Act 2013, the tax relief was extended to allow any unused relief arising in the first 3 years of trading to be carried forward for use in subsequent years. The relief was extended to companies that started trading in 2012, 2013, 2014 or 2015 and, in the Finance Act 2015, to companies that start trading in 2016, 2017 or 2018.
Capital Gains Tax (CGT) relief: If you sell your business on or after 1 January 2016, a lower CGT rate of 20% will apply to the net chargeable gains arising from the sale of all or part of your business, up to a lifetime limit of €1 million. If you sell your business on or after 1 January 2017, a CGT rate of 10% will apply to the net chargeable gains described above.
If you are self-employed you pay Class S social insurance contributions. There is a guide, PRSI for the Self-Employed on welfare.ie.
If you are starting up a business and decide to recruit staff you must register for PAYE and PRSI with Revenue. You can find information in our document about your obligations and duties as an employer and what are the rights of employees. There is a guide for employers who are starting a new business with a paid employee (pdf). You can also read our documents on topics such as the minimum wage, social insurance (PRSI), leave and health and safety.
We can guide you through every step of the way from the Initial set up, Tax Registration, Book – Keeping Advice and Staff Recruitment.