Starting your own business in Ireland is complicated.
The aim of this guide is to provide you with simple explanations for some of those trickier legal and accounting terms that every new business owner must navigate.
Everything you need to know from how to make the most of potential tax breaks to what type of company you need to register as (and how to register!) is included.
5 Steps to starting your own business
Pick a legal structure
Register your company
Find Funding
Be Tax Aware
Set Up Payment Structures
Let’s get started!
1. Pick a legal structure
What type of legal structure should I use?
There are many factors to be taken into consideration when setting up a business. Choosing the correct legal structure will be one of the first decisions you make. You can set up a business as a sole trader, as a partnership or as a limited company. The structure you choose will depend on your risk appetite and your type of business.
Not sure which you are? There’s more info below to help you decide.
Limited Liability Company – LTD
The limited liability company is the most common type of legal entity. Some key advantages are set out below:
The liability of its shareholders is limited. This means your company would be separate and distinct from you. Any legal action taken will be against the company and not the individuals that manage or own the company.
As a broad rule, customers and suppliers have more faith in a limited company (as it is operating as a separate legal entity and is not dependent on one particular individual).
The company can continue to trade in the absence of one particular director or shareholder.
Registration of a limited company name will provide more protection. The CRO will not allow companies to be formed with the same or very similar names. Therefore your new company name cannot be duplicated by another business.
Sole traders and partnerships cannot avail of the 12.5% tax rate. Conversely, Directors and Shareholders of a limited company can extract funds from the company tax efficiently at the standard rate of income tax. There is an option to leave the remaining funds in the company to be used at a later date.
Under the Companies Act 2014, a one document constitution is required (a memorandum and articles of association is no longer required.
Since the 2014 Act was introduced, companies can
Have just one director if desired
Can dispense with holding a physical AGM
Can have between 1 and 149 members. Limited companies also claim eligibility for audit exemptions – and we are available to answer any questions you may have.
If you opt to incorporate a limited company as described above, your company will be assessed under the corporation tax system. You may be eligible for three years of tax relief on corporation tax upon starting up. The level of relief is linked to the amount of employers’ PRSI paid.
Companies Limited by Guarantee - CLG
A company limited by guarantee is often used for clubs, management companies, sports organisations and charities.
Unlike a private limited company, a company limited by guarantee does not have a share capital. The shareholders’ liability is limited and CLGs are limited to the objects clause in the memorandum of association.
Under the 2014 Act, CLGs are still required to have a memorandum and articles of association and at least two directors.
Other forms of limited companies
There are other forms of limited companies under the 2014 Act which are good to be aware of. A designated activity company or a DAC is incorporated for a defined purpose and the company must keep to this purpose.
A credit institution or insurance undertaking is a DAC and these companies are more highly regulated.
Sole trader
A sole trader business is owned and run by one individual. Sole traders should be aware that all assets and all debts of the business are also assets and debts of the owner.
It is relatively straight forward to set up - you simply register with the Revenue for income tax and register your business name with the CRO.
If you have opted to operate as a sole trader, you will be assessed under the Revenue self-assessment system.
You can claim an earned income tax credit of €1,500 if you are self-employed or are a business owner or manager (who is not eligible for a PAYE credit on their salary income).
Partnership
A partnership is where at least two people enter business with a view to making a profit. Unlike a limited company, a partnership is not an incorporated legal entity and does not have a distinct legal personality from its members.
You can create a limited partnership under the Limited Partnership Act 1907. This means the liability of certain partners (the limited partners) is limited to the extent of their contribution. However, the general partners are liable for all the debts and obligations of the firm.
All limited partnerships should be registered in the CRO. It may also be necessary to register the partnership’s business name if the business name does not consist of the true names of the partners.
2. Register
How do I register a new company in the CRO?
You need to file a CRO Form A1, company constitution and the prescribed CRO fee in order to file for a new company. You can make the application online using the CORE online system.
What do I need to file in a Form A1?
When filing a Form A1, you will be required to provide basic details about your new company such as:
Company name
Company Type
Directors
Company Secretary
Constitution – Principle Activities
Registered Office
Authorised and Issued Share Capital
Shareholders
It incorporates a declaration that the requirements of the Companies Act have been complied with, and as to the activity which the company is being formed to engage in.
Do I need a Memorandum of association and Articles of association?
For an LTD, the constitution consists of a one document constitution. All other company types have a constitution that includes a Memorandum of association and Articles of association.
Register business name to the company
If you want to attach a different business name to your new company, you need to file a form RBN1 in the Companies Office (the filing fee is €20).
Register new company for relevant taxes
You can register your new company on the Revenue online system (ROS). It takes up to 2-5 working days for most taxes and VAT registration can take up to a few weeks (due to various Revenue checks on the new company). It is free to register. For more details, see our article on tax registration.
Prepare and file accounts and Companies Office returns
You will need to submit your accounts annually to the Companies Registration Office (CRO) within 28 days of the Annual Return Date. This can be up to 9 months after the accounting year-end.
You will need to also file a Form B1. This outlines the company’s details including details of directors and shareholders of the company.
Prepare and file corporation tax returns
An Annual Corporation tax return is due on or before 23rd day the 9th month after the accounting year-end. This is generally prepared as part of the accounts for the year by your accountant and tax adviser.
Register as an employer (to pay owner’s salary)
You will generally be an employee of your new company. The company should register as an employer and complete payroll on behalf of the paid directors. For more details, see our article on tax registration and timing.
3. Find Funding
How can I find funding for my new business?
We can advise you on some of the government-backed and private funding options available. Some examples are below:
Microfinance Ireland provides loans to small businesses with 10 employees or less, including sole traders and start-ups. The loans of between €2,000 and €25,000 are for commercially viable proposals.
Your local enterprise office provide training programmes in addition to grants and support.
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.
The New Frontiers entrepreneur development programme provides up to €15,000 in addition to business planning and marketing.
4. Be Tax Aware
Income Tax
Before you register for tax, you need a Personal Public Service number (PPS). If you do not already have a PPS number, you can apply to the Department of Social Protection. You will then need to register with Revenue for PAYE and VAT. The best way to register is through the Revenue eRegistration service (using the myAccount page and ‘Manage My Record’ and ‘Tax Registrations’).
PAYE
Subject to the exceptions below, a company must register as an employer and operate PAYE as soon as it has one or more employees. You should inform Revenue within nine days from the employee’s starting date.
Directors: The income of a director(s) should be taken into account when considering if you have employee(s). This is the case regardless of the director’s residency status or where he/she performs work duties.
Exceptions: It is not necessary to register as an employer if
You have a domestic employee and you pay them less than €40 per week have only one such employee.
You have multiple employees but you pay them €8 per week (or €36 per month), if they are full time employees or €2 per week (or €9 per month), if they have other employment(s).
Returns: P30 returns are required to be submitted to the Revenue on monthly, quarterly or annually (depending on levels of liabilities). The returns consist of the PAYE, PRSI and USC details for each employee.
VAT
You will need to register for Value-Added Tax (VAT) when the below thresholds are exceeded (or are likely to be exceeded in any 12 month period):
€37,500 for the supply of services only.
€75,000 for the supply of goods only.
If your turnover is below the relevant VAT threshold you can still elect for register if you wish.
Voluntary PRSI
If you leave Ireland to work abroad or if you are self-employed with earnings below €5,000 for any given year, you are not required to make full PRSI payments. However, this could reduce your contributory old-age pension when you retire.
One solution is to apply to the Department of Social Protection to pay voluntary PRSI. The payment of voluntary PRSI ensures you have full PRSI contributions for that year.
Am I entitled to any tax relief when starting up a business?
Certain tax reliefs are available for new start-up companies. You can apply for such relief for your start-up company on a Form CT1 tax return (on ROS).
Relief from corporation tax is available for new start-up companies for the first three year– this is known as Section 486c relief. It works by decreasing the corporation tax on the profits (and gains on disposals of assets).
For this relief to apply:
Your corporation tax (“CT”) liability should not exceed €40,000 in a tax year.
Partial relief is available if your liability is €40,000 to €60,000.
Your business should be a “qualifying trade”. It is broadly defined but certain exclusions do apply (for example, land development activities).
The amount of PRSI you pay determines how much relief you can claim. This amount may be reduced if you pay over the relief limit of €5,000 per employee (or €40,000 in aggregate for all employees).
When you have started to trade, you may be able to claim a tax deduction for certain pre-trading expenses (such as cost of preparing business plans or solicitors fees). These pre-trading expenses are treated as if they had been incurred at the time that the trade started.
Entrepreneur tax break on capital gains
This is a very beneficial relief for individuals planning on operating their business through a company structure.
It allows the gain on the sale of qualifying assets to be taxed at 10%. This is reduced from the normal rate of 33%.
The business can be any business (other than the holding or letting of development land).
There is a lifetime limit of €1 million on the gains that you can claim relief on. (For noting: only gains made on or after 1 January 2016 are counted in the limit).
You must have owned the business assets for a continuous period of three years (in the five
We are available to advise you on the provisions of 597AA of the Taxes Consolidation Act 1997.
5. Get payment
We can’t stress enough how important it is to get your finances set up correctly from the start. Your future self will thank you.
Invoicing System
When do I send invoices?
How you set up your invoicing system will depend on the type of business/industry you are in, but The first thing to decide is when you want to get paid. For many businesses monthly invoicing would be standard practice as it is the easier to schedule, but it’s up to you whether you want to be invoicing clients, weekly, quarterly or on a custom schedule.
What payment method to use?
It is vitally important that you know how you are going to be paid. Different methods include; Electronic payments like credit and debit cards, cash, cheque etc. The most important thing is to be clear with your customers how you expect to be paid and have clear actions if they do not follow protocol.
The final step is to design an invoice for your company. There are tons of free invoice creators online you can avail. Just make sure that the details are all correct for the client and you are good to go.
HOW CAN LALOR & COMPANY PROVIDE HELP YOU?
With over 30 years’ experience advising on liquidity, cash flow and debt issues, we are well placed to advise you on the best options available. We have extensive experience dealing with banks and other credit institutions and can help navigate your business to success.