Don't Set Up a Company too Quickly Without Reading This First

Don’t Set Up a Company too Quickly did you say? But I thought it was the way to keep my tax bill down.

We often come across potential clients who have either already set up a limited company, because they thought it was the “thing to do” or want to set one up now, hell or high water.

If they have already researched the pro’s and con’s that’s fine, but many haven’t. The thing is, it is night and day to operating as a sole trader (whereby you can just set up and get going)

Taking in an Elderly Person to Live with You

I like to use the parable of the traveler who stops by with their mother, and says “Here is my mother, and here is her money. Keep her alive and I’ll be back in a year to check on her welfare and her money”
This is what a limited company obligates you to have to do: It is just like a separate person being entrusted to you, and who you are in many ways a slave to:

It has:

It’s own name and address
A separate birth Cert
Separate Rules that it has to live by
The “Carers” (Directors) must be listed on public record with their personal details and PPS numbers
So must the owners. A separate registration stating who really owns the company must be filed
If you are being paid a wage, you must register as an employee, and tell the tax man what you are paying yourself, BEFORE you pay yourself or else a potential €4,000 could land.

The Companies Office (www.cro.ie)

Forms must be filed on time every year with the company business accounts (in a particular format) with a €20 fee. If you are late, there is fines of €100 immediate plus €3 per day. You also will then have to pay a Registered Auditor thousands to audit the company for a minimum of 2 years, usually at a heavy cost.

What about the Lower Tax Rate of 12.5%?

This can be a bit of a red herring. It just doesn’t apply as much as it used to. For instance:

The Professional Services Surcharge means that if you are one of the listed businesses with Revenue, the rate climbs to 19%
Close Company Surcharge is for small companies that don’t take money out. Another 20%.
The lower tax rate is the company’s anyway. You, yourself still pay normal tax on your wages as outlined above.

The point is, don’t set up a company too quick unless you are sure it is for you. If there are more than one of you involved, then consider investing in a Shareholders Agreement. This will hopefully avoid a lot of hassle if there is stripe between the owners down the road.