Before
you start up a new business, you should consider whether to
trade using a company or under your own personal identity.
A Company
must be registered with the Companies Registration Office in Carlow.
It is important to note that a company is a separate legal entity from the
persons who formed it.
Trading through a company can have some very important
advantages for you and your business. These include:
There is a very low Corporation Tax rate in Ireland of 12.5%
. This can rise to a rate of 25% for companies that supply services. This compares favourably with the current combined high rate of
over 50% for income tax, PRSI and levies for self-employed
taxpayers.
The low rate of Corporation Tax
can allow a company to accumulate wealth in a very tax-efficient
manner.
This is especially relevant if
substantial sums are being borrowed to finance investment.
Very favourable provisions for
tax relief on directors’ pensions
The availability (in some cases)
of the Seed Capital Scheme. Under this Scheme an employee,
who leaves employment and invests in a newly-trading company,
may be entitled to claim refunds of income tax paid in previous
years.
Limited liability - The
liability of company directors and shareholders in relation to
the business of their company is restricted to their investment
in the company. It is worth noting that limited liability
protection may not apply in certain circumstances. Also many banks and even trade suppliers now often require personal guarantees from the directors.
A limited company identity can
often, of itself, lend a certain prestige to a new or growing
business.
On the other hand, you should consider the
following matters before deciding to incorporate your business:
The Companies Acts impose strict obligations
on company directors to comply with Company Law.
This places important responsibilties on
directors to ensure that company affairs are conducted in a
proper manner and that returns are made correctly and on
time to the Companies Office.
The possible need for an annual company
audit.
Most small companies can now avail of audit
exemption, subject to certain terms and conditions.
Potential future tax planning difficulties
in accessing company funds for personal use.
If
a company owns property, there may be additional tax
complications if the property is sold and the company
shareholders need to access the sale proceeds for personal use.
The cost of liquidation and/or winding up of
a company that has ceased to trade.
