Starting Up: Solo and Clueless

6th

Ok so heres my situation in point form:

• I'm a Graphic Designer for the last 10 years
• Made redundant at the end of April
• Have a few clients I do bits and pieces for
• Decided the only way I can build on it is by starting up properly
• I have an office (tiny) as of next Monday
• Apart from rent I have no real expenses
• Married with 2 kids so I'm not in a place to take big risks
• I'll be a one man show
• I have all the hardware/software I need

Now my problem is that despite being very good at what I do and having clients I have no real idea about setting up a business.

• Are my options to be a sole trader or start a limited company?
• Whats the difference?
• How easy is it to actually set up?
• Can I trade now and sort it out as I go?

Seriously maybe I dont know enough to be thinking about a step like this but its really my only option as there are no jobs out there and besides, I think I could do a good job of it and have a good rep in doing what I do. I'm not just a designer, I was production manager, can deal with suppliers, clients and ran the office in my last job for 3 years.

My turnover wouldnt be huge but it beats being on the dole!

Cheers

6th

Pixelcraft

6th wrote: »

• Are my options to be a sole trader or start a limited company?

Yes

6th wrote: »

• Whats the difference?

Sole Trader = Your personally liable for debts, limited liability = company is liable.

6th wrote: »

• How easy is it to actually set up?

Easy enough, www.cro.ie

6th wrote: »

• Can I trade now and sort it out as I go?

Kind of, just remember you'll need to register a business bank account, and get a .ie domain both of which will need you to have a RBN certificate. By all means start now if you are ready to get things in order within the next 30 days. The most difficult part of this will be getting the work in. Best of luck!

probe

You are not trading (ie buying and selling merchandise - so your risks are limited) and you are running a one man show - so if you are careful with the commitments you enter into, you probably don't need to incur the expense and extra compliance costs of a limited liability company at this stage.

Use your own name or register a business name.

If the work you do has a risk of legal liability cases against you for negligence etc - you might need insurance. But if you are simply designing something, and the client is happy and signs off on the job and pays you - your liabilities are unlikely to be material. If you face big outlays for a particular job, get the client to pay up front for whatever you might have to buy.

The corporate legal system has gone so OTT in Ireland in recent years that your risks of fines and other penalties for what might be a bureaucratic slip-up on your part (failing to file form 1234 by date x) are far greater if you use a corporate structure.

Keep it simple at the start.

In the past Ireland had the advantage in being a relatively un-bureaucratic country to do business. No longer alas. Don't invite bureaucracy by incorporating a company. Bill Gates and Paul Allen didn't incorporate Microsoft for several years after commencing the business in 1975.

DanGlee

Best of luck dude.

I'm kinda in the same boat. Was made redundant there a few months back and just graduated with a Masters in computer forensics, however there are NO jobs what so ever in it in the whole of Ireland and I've emailed companies even willing to work for free and the have the f'king ignorance to not even reply back... thats how bad it is! Anyway, I digress!

I was thinking of starting my own little online company for data recover/forensics stuff, so any info here would be a great help. I have a friend who owns his own business that sets up companies and he does it for a couple of hundred quid (and upwards, depending what you want) and you would be registered as a company as bare minimum (his address is : www.cag.ie )

After that the next bit would be getting a website up and running then its business. Do you need to be registered for tax, etc.

I'm on the dole as the mo and I certainly would not be giving it up as I would not expect to make any more for a while, if enough to cover cost of bills and child. I think you can"legally" be on the dole and start a company??? correct me if I'm wrong!

DG

6th

Ok well I'd have no big payouts, basically I'm asked to design a job (say a newspaper ad) I design it, get it passed and then send it off to the paper. In cases where I'm designing a big print job well then I get the client to pay the printer directly or pay me in advance.

So setting up as a sole trader and registering for VAT looks like the best way for me to start with my setup - I presume its possible to move from being a sole trader to a limited company with no real problems?

probe

6th wrote: »

I presume its possible to move from being a sole trader to a limited company with no real problems?

It is no more complicated that starting off with a limited liability company.

If you really want to be legally pedantic, and are setting up written long term agreements with your customers (I suspect unlikely at this stage), you might want to put in a clause in your agreement to make the agreement continue in existence post incorporation - eg an agreement between Joe Blogs Design and Customer X might be worded an agreement between Joe Blogs Design ("including successors and assigns") and Customer X. This provision would enable you to assign the contract to your newly incorporated company. But in reality it is a load of rubbish. If you are doing a good job for your customer, they will stick with you. If you aren't, there is no amount of legalese that will change the relationship!

While some clients mightn't like the idea of you being able to assign the work to someone else, you can explain that you might be transferring the business to a limited liability company at some stage (which you will control - and there will be no change really) they probably won't have a problem with that.

If/when you incorporate, it is best to formally write to everyone you do business with to advise them of the company name and request them to amend their records accordingly. Suppliers invoices should them start coming to the company name.

If you are not doing business in your own name or in the name of a limited liability company, you need to register the business name - cro.ie

DubTony

Something else to consider is salary. As a sole trader all your profits are considered your personal money and are taxed at the personal rate. As a limited company, the company pays you a salary on which you pay the appropriate tax and PRSI, and the company's profits are taxed at Corporation tax rate of 12.5%.

It's probably not a bad idea to elect to pay PRSI at the full rate and so ensure full social welfare entitlements if it all goes belly-up. Talk to the tax people or an accountant to find out how this works.

RUDOLF289

Hi Dubtony,

My understanding is, if you set up a limited company, you will need a minimum of two directors. The most likely scenario is that the OP would be one of them. Therefore, even though as a director you are paying PRSI, you are not entitled to the dole if the business fails.

I do think it would be a good idea to talk to an accountant. Normally the 1st consult is free and perhaps you should consider talking to more than one and get a feel for what is out there. There are upsides and down sides to either Sole Trader or Limited Company, best to have an expert to advise.

Regards,
Rudolf289

DubTony wrote: »

Something else to consider is salary. As a sole trader all your profits are considered your personal money and are taxed at the personal rate. As a limited company, the company pays you a salary on which you pay the appropriate tax and PRSI, and the company's profits are taxed at Corporation tax rate of 12.5%.

It's probably not a bad idea to elect to pay PRSI at the full rate and so ensure full social welfare entitlements if it all goes belly-up. Talk to the tax people or an accountant to find out how this works.

dbran

DubTony wrote: »

It's probably not a bad idea to elect to pay PRSI at the full rate and so ensure full social welfare entitlements if it all goes belly-up. Talk to the tax people or an accountant to find out how this works.

Hi Dubtony

You cannot "elect" to pay the rate of PRSI you want to pay. It is determined solely by the facts and your status.

If you are a sole trader or a director with more then 15% of the share capital of the company you must pay the s1 stamp. You cant decide to pay more.

Not fair perhaps but unfortunately thats the way the cookie crumbles.

DB

6th

RUDOLF289 wrote: »

I do think it would be a good idea to talk to an accountant.

You're right.

dbran wrote: »

DB

Hi

Pixelcraft

as mentioned above, the most important thing in the design industry: CONTRACTS and in this economy, money up front, at least a percentage - don't learn the hard way!

DubTony

dbran wrote: »

Hi Dubtony

You cannot "elect" to pay the rate of PRSI you want to pay. It is determined solely by the facts and your status.

If you are a sole trader or a director with more then 15% of the share capital of the company you must pay the s1 stamp. You cant decide to pay more.

Not fair perhaps but unfortunately thats the way the cookie crumbles.

DB

OK, thanks for that. It's just that I spoke to a woman a few weeks ago who claimed to have paid her PRSI at an A rate while running her consultancy business for 5 years (2 customers). Her business finished when both her customers went out of business within 2 months of each other. She was able to claim unemployment benefit based on the fact that she had made the full contributions. (I assumed she wasn't a limited company).

Anyway, that's what she told me. I can't believe it's something anyone would make up. :rolleyes:

6th

Pixelcraft wrote: »

as mentioned above, the most important thing in the design industry: CONTRACTS and in this economy, money up front, at least a percentage - don't learn the hard way!

Will definitely be the way for me to go with new clients but my relationship with existing clients is a lot more informal - i intend to structure it alot more as I go though.

dbran

DubTony wrote: »

OK, thanks for that. It's just that I spoke to a woman a few weeks ago who claimed to have paid her PRSI at an A rate while running her consultancy business for 5 years (2 customers). Her business finished when both her customers went out of business within 2 months of each other. She was able to claim unemployment benefit based on the fact that she had made the full contributions. (I assumed she wasn't a limited company).

Anyway, that's what she told me. I can't believe it's something anyone would make up. :rolleyes:

Hi

I suspect she might have snuck under the radar on that one

She wouldn't have been entitled to the A1 stamp if she is self employed even if she had paid for them. Still if she got away with it.......:)

DB

Cgm

6th,

See below a couple of things to think about if setting up a company however the basic starting rule is if you think you are going to earn more than you will pay yourself then you should consider a company however if your turnover equals your wage then remain as a sole trader

Summary

· The company has a legal existence separate from management and its members
· Members' liability is limited
· The company's name is protected - Incorporation of a limited company protects it from use by another limited company
· It has flexible borrowing powers
· The company continues despite the death, resignation or bankruptcy of management and members
· The interests and obligations of management are defined
· Appointment, retirement or removal of directors is straightforward
· Ireland's Corporate Tax Rate of 12.5% is one of the lowest in the world
· New shareholders and investors can be easily assimilated
· Employees can acquire shares
· Taxation: sole traders pay income tax. Sole traders income is taxed as the proprietors income, regardless of how much profit is retained as working capital, and interest on loans to the business is taxed as income.
· Directors pay income tax and the company pays corporation tax on company profits, and with current rates of tax company profits earned and retained in the business are assessed to corporation tax at lower rates than if income tax were payable on equivalent profits earned by an unincorporated business
· Setting up a limited liability company offers just that - limited liability
· Shareholders in a limited liability company are only liable to lose the share capital they subscribe
· For sole traders and in partnerships, the individuals personal assets are at risk if there is a claim against the organisation
· 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 shareholders) is the appropriate person to be sued in the event that debts are incurred by the company which remain unpaid, despite demand
· Scope for greater company pension scheme to be secured through a limited company
· A limited company has a greater ability to raise finance by the issue of shares
· Shareholders looking for outside investors to invest may be able to take advantage of the tax incentive Relief for Investment in Corporate Trades, otherwise known as the Business Expansion Scheme (BES). The scheme provides individual investors with tax relief in respect of investment in certain manufacturing, service, tourism, research, constructing and certain music recording activities. This can substantially reduce the cost to an investor or his investment. It also enhances the ability of eligible companies to attract outside investment.
· Ownership of a limited company can be spread over a greater number of people
· Personal tax advantages can accrue for directors of a limited company
· There may be a greater degree of business credibility of trading through a limited company
· The rights of shareholders are normally clearly defined and protected


Cheers

antoinolachtnai

dbran wrote: »

Hi

I suspect she might have snuck under the radar on that one

She wouldn't have been entitled to the A1 stamp if she is self employed even if she had paid for them. Still if she got away with it.......:)

DB

She overpaid prsi contributions, but got money back when she went on the dole.

Really, it is very unlikely that the social welfare would follow her up on this one. Depending on how much she was earning, they might actually owe her money in addition to the dole they've already wrongly paid out to her.

Boom Boom

To 6th and danglee

one option for you both th look at is the "short term back to work enterprise scheme" run by social welfare basically it's a scheme that allows you to keep your jobseekers benefit for one year and start up a business. you should have a read of the the information on their web page....

http://www.welfare.ie/EN/Schemes/JobseekerSupports/BackToWork/EnterpriseAllowance/Pages/ea.aspx


hope this helps