5 Frequently Asked Questions When Starting A Business

 

Starting a business can be an exciting time. However, it can also be stressful. We are often asked questions by potential clients about business in Ireland. We decided to create this article to answer 5 of the frequently asked questions about starting a business.

 Which is better a Sole Trader or a Limited Company?

The answer to that depends on the type of business you are running. Factors such as whether you are trading outside of Ireland, how many people this business will employ, whether the business sells a service or product and what level of revenue you expect the business to generate.

The most common types of businesses in Ireland are sole traders and limited companies and each has its advantages and disadvantages so read on if you are trying to decide which option is best for you.

We have helped lots of businesses from start-ups to choose their particular business journey.

Our expertise and our experience will certainly help you choose which path is best for your business enterprise.

 In this article, we will help you figure out the best structure for your business.

 Advantages and Disadvantages

One of the main differences is that Sole Traders are personally liable for the debts of the business. If you decide to choose this path then assets that you own like your home or your van/car can be used to pay off your creditors if the business runs into problems.

That is in contrast to limited companies which are considered to be separate legal entities from the owners and their personal assets.

This means that your businesses’ creditors can only claim against your company’s assets.

Cost is another thing to be considered here as setting up a limited company is more expensive and more time-consuming than registering as a sole trader.

That has to be balanced against the security of knowing that your personal assets are relatively safe if you have decided to setup up your enterprise as a limited company.

Advantages of Sole Trader

• More straightforward to set up & shut down

• Fewer legal filings compared to those required if you are a Limited Company
• As a sole trader you don’t have to prepare the same level of financial statements.
• More privacy than a company – your financial details are not visible to the public whereas anybody willing to pay for them from CRO can do so if you are a limited company.

 

Disadvantages of Sole Trader

• The line between you and your business doesn’t exist in legal terms.
• You are open to unlimited liability – i.e. your home and car can be used to settle debts.
• You are still required to register a business name with the CRO.
• Any earnings (minus expenses) are liable to be taxed as your income. Depending on your level of income, that can be very costly.
• Planning for your taxes is difficult based on the previous point.
• You are required to prepare a tax return each year.
• Some larger firms will only deal with limited companies.
• Your access to grants and credit can be curtailed.

Advantages of a Limited Company

 Any profits made by the company are taxed (minus expenses) at 12.5% (Corporation Tax)

• You can appoint yourself as a director and shareholder of your company.
• Personal liability is diminished as your personal assets are outside of the legal entity of the company.
• You are allowed certain tax reliefs and benefits as a company director.
• You can plan financially for years ahead and set aside monies for pensions etc.
• Easier to apply for a government or local enterprise grant as a company.
• Banks can easily see your trading position if you are looking for credit. 

Disadvantages of Limited Company

• You are legally bound to make certain corporate filings by certain deadlines.
• Anybody can see your company’s financial situation.
• There are large fines/penalties for non-compliant companies.
• It takes longer and is more expensive to set up than a sole trader.
• Directors have certain legal obligations and at all times must act in the best interest of the company.
• If you sell shares in your company, you may lose a portion of your ownership.

 

If you are still not sure then talk to us for professional guidance, contact our team today.

 

How do I register my business as a Sole Trader in Ireland?

 

Sole Traders need to register as self-employed with Revenue. In Ireland, limited companies are required to register with the Companies Registration Office as well as Revenue.

Whether you are a sole trader or a limited company, you will pay tax to Revenue. It’s a matter of when and at what rate.

 One of the things both business structures have in common is that they can both register for VAT and Relevant Contracts Tax (RCT) as well as employers’ taxes.

Tax registration is a key box to be ticked when you are starting a business in Ireland because you will need to make an annual tax return to Revenue. 

Ways to register with the CRO

Sole Traders need to register their trade name with the CRO if they want to trade under a different name than their own.

 For example, Sean McCarthy can start a business called Sean McCarthy without registering with the CRO. But if he wishes to use Compelling Content Creation as his business name, he will need to register that name with the CRO.

 The CRO plays a larger in the workings of a Limited Company than that of a sole trader and any changes to company names need to be registered with them. 

If you are considering setting up a company or setting up as a sole trader, just keep in mind that it can take a couple of weeks (pre-COVID it was a week to 10 days) to process applications for new companies.

If you need expert advice on how to set up a business in Ireland, get in touch today and we’ll happily talk you through it.

Do I need an Accountant?

Very early-stage business owners don’t usually hire an accountant in their first few months. If you only have a few transactions, the costs of hiring an accountant probably outweigh the benefits.

 

But that doesn’t mean you don’t need to do the bookkeeping at all. It’s very important that you keep organised records of all your transactions – e.g. receipts, invoices, and bank statements, and follow a proper bookkeeping process.

 

We always recommend that our clients use online accounting software as soon as their business is set up. We love Xero bookkeeping and recommend it to all our clients. It’s easy to use for beginners, can integrate with other software like Shopify and Stripe, and it will help you to run an efficient business.

 

Online accounting software also makes bank reconciliations easier – which can be a very time-consuming task, and it helps you to have more control over your finances. Talk to our Client Services Team about our accounting services that include a free subscription to Xero – we’re always here to recommend the best services for your needs.

Setting up a business in Ireland

The first step in starting your business is to get your business registered.

 

Whether you decide to start as a Sole Trader or Limited Company, you need to start legally operating as a business before you invoice clients. It’s an exciting time for you so we understand the importance of understanding every aspect before committing to starting a business in Ireland.

Book A Free Consultation

Are you looking for professional help? aperio is a Cork-based outsourced accounting and consulting company that can take care of all your company formation. We are experts in bookkeeping, management accounting, financial compliance, and financial project work such as grant applications. Book a FREE Consultation today.