Are you thinking about opening an Irish limited company?  Find out what is involved below.

Limited companies prepare accounts for CRO (Company Registration Office) annually which will be more costly than preparing accounts as sole trader.

Corporation tax is a tax on a company’s profits and this is at a rate of 12.5% for trading income and 25% on no trading income. If you operate as a company director you can decide the level of salary you will receive under the PAYE system.

From a pension point of view a company can make more generous pension contributions to your retirement fund and have these contributions offset against its taxable profits. Also if a director owns a car and pays for their own car insurance, motor tax and fuel costs they can claim a mileage allowance for any business miles they travel on behalf of the company in accordance with the civil service mileage rates, this cost will be offset against the profits of the company.

Self- employed individuals pay PRSI under Class S. PRSI is charged at 4% on all income or a minimum of €500 whichever is the greater. Self-employed people will generally be entitled to the following benefits assuming they have paid the minimum qualifying contributions:

  • State Contributory Pension
  • Widow/Surviving spouse pension
  • Maternity, Paternity and Adoptive Benefits

If you are self employed regardless of whether you trade as a sole trader or limited company you must keep full and accurate records of your business from the outset. Again whether trading as a sole trader or limited company you will need to have a business bank account set up and ensure you are using this bank account for all business transactions from the outset.

For companies who trade with government departments, state bodies, the HSE etc. tax at the standard rate is deducted from payments made for professional services. This is known as professional services withholding tax. Ensure that you keep records to support this as the tax deducted can be claimed and offset against your tax liabilities in the year it is withheld and any excess can be reclaimed.

Don’t get off on the wrong foot with Revenue. Pay your tax liability on time. If you are having trouble making a tax payment, let the Revenue know in good time. It is going to be cheaper to borrow the money from a bank than to suffer a heavy late payment surcharge and interest. Always ensure your returns are complete and accurately reflect your business activity. Stay on top of your invoicing, paperwork and cashflow in order to be able to pay your tax on time.

To identify if creating a limited company is the right option for you, email to discuss this further.