For new businesses, company formation can be the most exciting and also daunting of tasks. Especially if they haven’t ever completed the process and don’t know anything about forming a company in Ireland.
It can be an onerous task if you are not sure what setting up a limited company means, and what it entails in both a legal sense and practical sense.
This post aims to help you through company formation in Ireland.
You can reach out to our team if you need expert advice regarding company formation in Ireland. Contact us here.
What Is A Company?
A company is defined by the Companies Registration Office (CRO) as follows: A company is a legal form of business organisation. It is a separate legal entity and, therefore, is separate and distinct from those who run it.
The company (and not the individual shareholders) is the appropriate person to be sued if debts are incurred by the company which remains unpaid, despite demand. Once incorporated, the company will be required to file an annual return.
From the definition you can see that the main benefits of setting up a limited company are that the shareholders are limited to the amount invested in the company and that it is a separate legal entity from the owner of the business. The disadvantage of company formation is that the compliance requirements are greater than those associated with a sole trader.
How Do You Form A Company In Ireland
1. Appoint a Director of Directors
For the company to be formed legally, certain requirements must be fulfilled. A director or directors has to be chosen. The directors’ main responsibilities are managing the company on behalf of the shareholders and ensuring legal obligations are adhered to such as ensuring that annual returns are filed.
Failure of directors to make an annual return can result in fines of up to €1,200 and two years of audit requirement for the company.
There are certain legal responsibilities that have to be considered when deciding on directors for the company and these are different for European Economic Area (EEA) and non-EEA residents.
Irish law permits there to be just one director if they are EEA residents. If all directors intend to be non-EEA residents, then a non-EEA residents bond needs to be acquired. If a non-EEA resident sets up a company with an EEA resident, then the bond will not be required.
2. Choose A Company Secretary
Choose a company secretary. Next, a company will have to choose a company secretary, in a one-director company the director and secretary cannot be the same person. The secretary needs to file an annual return every year with the CRO.
3. Choose Shareholders
The shareholders own the company by owning its shares. They differ from directors who are the ones who manage the company. A company with a single director can also have the same person as a single shareholder. A director does not need to be a shareholder and a shareholder has no right to be a director.
Who Holds Shares In The Company?
- Decide on shares to be issued.
A share in essence is a piece of the company you can give away or sell in the future.
Shares are issued when setting up a company and more can be issued/transferred when the company is operating. It can be complicated and usually professional help is required for this process.
There are different types of share offerings within a company.
Authorised shares: These are an aspirational number of shares you can issue now or in the future. They do not affect the value of the company. Generally, you authorise significantly more than is needed in the present, so you have options in the future.
Issued shares: These are the shares that have actually been allocated to shareholders and paid for.
An example of a typical share offering would be 100,00 authorised shares and 100 issued @ €1 in value.
1. Choose A Company Name
This is the fun part of company set up provided you pick a unique name (which most businesses do anyway) as the CRO have strict rules about unique names of companies.
You can check if your name is unique prior to submitting it to the CRO through their website. Click here to check your names eligibility.
2. Select a registered address and a business address
A registered address is the official, legal address of the company. It must be a physical location in Ireland. It can be your accountant’s office and it differs from your business address. Your business address is where you do your day-to-day work. If you are a virtual business, you can use a virtual office address.
3. Prepare and sign incorporation documentation
Now that the above is done you are ready to register your company. You have two options. Option 1 – do it yourself through Companies Online Registration Environment (CORE). Or, Option 2 – outsource to a formation specialist.
On average it can take between 5-10 days for the CRO to process an application for a new company. This timeline can vary particularly if you are unfamiliar with the documentation. Therefore, it is often easier to go the outsourcing route.
4. Oder your company seal
Once your company is incorporated, you will now need to order your company seal. A seal has the company’s name engraved on it and is used for official documents requiring a seal e.g. share transfers.
5. File with Register Of Beneficial Owners (RBO)
Any shareholder that owns 25% or more of a company must be registered with the RBO. Not registering is a criminal offense and can result in a fine or even conviction. It can also affect setting up a company bank account as banks may request proof of registration.
6. Register for Taxes
It’s the part that nobody really wants to do but the part that everybody must do! Registering for tax is a totally separate part of the business set up but is just as important.
You Need to register for tax with Revenue. This is separate to registering with the CRO. Possible tax types that you may have to register your company for are VAT, Corporation Tax, Relevant contracts tax (RCT) and employee PAYE. Paying and filing taxes can be difficult to manage and requires records being kept up to date. Non-compliance can result in penalties.
Registering for taxes and maintaining the necessary records can be time consuming. If you need help with this process call us today to discuss your options Contact us here.
Do You Need To Set Up A New Bank Account?
To set up an account with a traditional Irish bank one director will generally need to have at least one face to face meeting with the bank of their choice. Alternatively, you can set up a bank online such as Revolut – see our revolt article here.
You will need to bring the following documentation with you when setting up your account as a minimum requirement – original cert of incorporation, company constitution, A1 form. i.e. the company must be formed before opening a bank account
When Do You Need To File Returns with the CRO?
File annual return with CRO. A filing with the CRO must be done even if the company hasn’t commenced trading.
The first return is due 6 months after incorporation and no financial statements are required. The second filing and remaining will be based on 12 month cycles thereafter. Companies have 56 days after their assigned filing date to complete all elements of the annual return. If this date is missed, penalties can result in fines or even an audit being required for two years.
The final piece of forming a company in Ireland is completed with Form 11 completion.
Proprietary directors must file a Form 11 each year before the 31st of October. This must be filed even if the company hasn’t traded.
Note: the above are the steps involved in company formation, however there are other steps in running your company to bear in mind. If you intend to hire employees you will need to ensure you are compliant with local legislation re minimum wage, health and safety, non-discriminatory company policies etc.
Do you need help with outsourced bookkeeping? Since 2013, aperio has been helping business owners take control of their finances and build profitable, sustainable businesses.
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, bookkeeping, management accounting, financial compliance, and financial project work such as grant applications.
Click here to schedule a call with us.