How to built a limited company.

superfly35

Hi everybody,

I'm working in IT for 8 years now as Developer, and I seriously thinking about build my own company in 2009 in order to try contracting.
Which it seems straight forward to find. It was the case 6 months ago now with the recession, I don't now.

But anyway I still think about build my own company, as I'm tired to change company because the boss said too many non-sense, or the wage, or the work itself, or the ambiance...
So I believe if I have my own company, it should solve some problems.

I'm doing a lot of reading at the moment, in order to do it right as I would like to do that as my career from now on.

So I will build a private limited company.
After I don't really know between the different type, Single-Member, or normal private limited.
I don't really understand the difference, if someone can help me on that?

What I want it's be the only one in my company, I won't have any employee. I though the single-Member was for me but I have read on Basis.ie, you need to 2 directors. Also I would like to know if the 2 directors are reponsible of the company or only 1?

I have also so question about the contract you have to sign with you client, I suppose you need a solicitor to write one "generic"?

If you can help me on that It will be really great.

Also I would like to know the price of the creation in average?

And I have another question about tax. Let take an example:

My daily rate will be €300, let say there 22 working days in the month, then the company will invoce the client €6600.
So the company will receive €6600, and the company will need to paye the Coporation Tax (12.5%) €825. Which it means the company will still have €5775 left.

The question is them about how the company will pay me? Should I will pay the incoming Tax even if I will be director of the company?

Thanks a lot
Superfly

antoinolachtnai

You really need to get an accountant.

Setting up will cost a few hundred euros.

You've got the tax thing all the wrong way around. You only pay corporation tax on profit, not turnover.

You have to pay income tax on the salary you draw from the company.

But really, talk to an accountant, it will save you time and money.

TechieEddy

Why do you want to setup a company? Would you not be better off setting up as a sole trader?

superfly35

Hi TechieEddy,

I want to setup a company, in order to be limited in finance responsability.
If something goes wrong, even if it's unlikely to happen with a consultancy company. I don't want to risk my own property (flat, car,...)


Hi antoinolachtnai,

I will take an accountant when I will be ready to build the company, I know already an accountant who will probably do it.

My question here are more for a research/understanding perceptive, than doing my own accounting. I'm not irish, the country I'm from the rules are different .
So I have question about the system itself.

So if anyone can help it will be great.

Thanks
Superfly

PRman

Most postings are correct so far. Corporation Tax is on any profit made and you pay normal income tax rates on what you pay yourself. Some employers will require you to have a limited company so I'd check whether this is is the case. The advantage for you of going limited are well as the limited liability is that you have more scope for deducting expenses and also you can make larger pension contributions than PAYE workers. You run a tight ship on it and it'll work well for you. A single member company means you are the sole owner, but you need a 2nd Director (can be family member not living in Ireland) With regard to forming a company your best bet is a company formation agent. Nightmare to do yourself and takes a lot longer. Try www.companyformations.ie. Good luck...

antoinolachtnai

As I understand it, you don't strictly need a second director. You do need another person to be secretary, but that's different.

Musha

TechieEddy wrote: »

Why do you want to setup a company? Would you not be better off setting up as a sole trader?

+1 Setting up a Limited company starting is time consuming and expensive as accountancy fees/business loans etc are more expensive.
Any business loans that you get will be personally signed by you so even if the company goes belly up you will still have to pay it back.

you would be safer setting up as a sole trader and get some contracts under your belt and grow slowly, with the climate as it is at the minute the lower you keep your costs the better chance you have of making the business work in the long term.

thecleverone

As I understand it, you don't strictly need a second director. You do need another person to be secretary, but that's different.

For a limited company, you still need a minimum of two company directors, one of which can also be the company secretary. This will change in the near future, but for the moment, 2 directors are still required.

Yeah but you can throw your mums name down as a second director just for the sake of it, can't you? I know that's what my friend did with his ltd business and gave 1euro of shares.

byrne0f56789

Get an accountant but remember the fees will be nearly €2000 to complete your year end accounts and file with the CRO. Your accountant will also charge you for tax advice. If you get an account to register your company expect a bill of around €800.

Also, the amount you are making means you will have to charge VAT however this is not a factor as you just add it to your price. The company you charge won't mind as they claim the money back. You will have to make returns twice a month which you should do yourself. It's very simple through revenue online (ROS)

thecleverone

Yeah but you can throw your mums name down as a second director just for the sake of it, can't you?

Yes you can, but remember that she will be under the same statutory and fiduciary duties as the main director of the company and so can be held personally liable in certain circumstances should the company go belly up. A defence of "i was only a second director because my son asked me to" will not be held in court as they hear it every day. Being a director of any type of company should not be taken lightly.

Thats why the Company Law Review Group are currently changing various aspects of companies to include (in the near future), single director companies to alleviate the need of having a second director to fulfill a statutory numeric requirement as the second director is as much responsible as the main director for what happens in the company.

What if one director has 90% of the shares? Then the second one surely is only liable for 10%?

Or does the number of shares in the business not matter?

thecleverone

Directors and shareholders are completely different (although in a lot of small companies, the directors and shareholders tend to be the same people). Directors are the officers responsible for the daily running and compliance of the company. The shareholders are simply the individuals who own the company.

When it comes down to liability, the share split does not come into it at all as in many companies, some directors are not shareholders. It is the directors responsibility to run the company properly and effectively and if they don't, they can become personally liable in certain circumstances. Doesn't matter if they own shares or not.

The shareholder split, applies to the ratio in relation to dividends, or if they company was to wind up, the amount of money they would have to contribute upon the winding up of that company.

R3al

thecleverone wrote: »

For a limited company, you still need a minimum of two company directors, one of which can also be the company secretary. This will change in the near future, but for the moment, 2 directors are still required.

In fact under Irish law you can form a limited company with just a single director:

Formation of a Single Member Company – one person may, by subscribing his/her name to a Memorandum of Association and otherwise complying with the requirements of the Companies Acts and these Regulations relating to registration, form an incorporated company being a private company limited by shares.

Also bear in mind that the 2009 budget introduced an exemption from corporation tax and capital gains tax for new small companies for the first three years trading (as long as the tax liability is under €40K)

thecleverone

In fact under Irish law you can form a limited company with just a single director:
Formation of a Single Member Company – one person may, by subscribing his/her name to a Memorandum of Association and otherwise complying with the requirements of the Companies Acts and these Regulations relating to registration, form an incorporated company being a private company limited by shares.

This is where so many people get confused. A single member company relates to the amount of members/subscribers/shareholders and NOT to the amount of Directors required. Two is still the minimum number of directors required for a limited company, even in a single member company.

Also bear in mind that the 2009 budget introduced an exemption from corporation tax and capital gains tax for new small companies for the first three years trading (as long as the tax liability is under €40K)

Just remember that this does not apply to all new small companies. There are a fair few restrictions in place and will only apply to a certain number of startups.

antoinolachtnai

Yup, I said that this was possible originally on another thread. I have checked this. I was wrong. There is a change on the way which will allow single-director companies, but at present it is not allowed in Ireland.