Changing from Sole Trader to Company

ch2008

Hi All,

Due to an expansion in operations I'm going to change to a company format. Am I right in daying that I need to cease trading with a RBN3 form and form a company with an A1 form? I'm presuming this can be done at the same time and that I don't need to re-register business names etc?

Any advice, warnings and opinions greatly accepted

mickbyrne

Hi Ch2008,
Form RBN3 ceases your business name registration that you used as a sole trader. I wouldn't be to concerned about doing this as you never know when you might want to go back to that business name. I would definitely leave it for a couple of months.

Regarding setting up a company, Form A1 is the correct form, you will also need memo & articles of association. I would advise going to a co-sec agent or an accountant to get this done, the accountant will also sort out tax and VAT registrations etc and the costs are very competitive.

If you are registered on CORE (CRO's online system) or your accountant is, you can check and then reserve your proposed company name. The cost of doing this is then offset against the cost of setting up the company if done within the time frame (28 days I think).

You should try to have a clean cutt off at the end of a month preferably coinciding with your current year end. Depending on the current size of your business and assets that you own the process is straight forward

Regards,
Michael
www.perspective.ie

Culchie

At what point (turnover, No. of Employees, Value of Assets etc....) should one consider moving from a Sole Trader to a limited company?

mickbyrne

In many ways I would never encourage people to change to limited companies. Red tape and costs are much higher with ltd companies.

Some things to consider would be:

1 - Risk of losing everything, Ltd companies offer a degree of personal protection should you get into financial dificulties. If there is a high risk of this happening a ltd company would be a good option.

2 - If you are making more than you need to live on, i.e. your bank balance is increasing, then ltd's can offer better tax saving oppurtunities than sole trade.

3 - If you have a high capital requirement, i.e. need to carry a lot of stock and debtors a ltd company is a good way to build this capital at a low cost (12.5%Corp Tax v's 46% personal tax)

Regards,
Michael
www.perspective.ie

djk1000

You need to talk to an accountant for this, it's not tricky, but it can be technical, particularly with the tax implications (there are tax implications in ceasing a sole trade and in starting a company, but there are also exemptions for a case like yours).

You're not changing anything into anything, you're selling the assets, goodwill etc of your sole trade to a company and the company is buying this stuff from you with its shares, you then effectively own the company.

I'd strongly suggest tat you get good professional advice rather than filling in forms yourself.

don't de-register the trading name, it is potentially an asset which you will sell to the company.

mickbyrne

I agree with you djk1000, You can contact me if you like.

Regards,
Michael
www.perspective.ie

Notanumber

What is the situation if you registered a business name, never traded (became ill), but never de-registered with Form RBN3. Having recovered, I want to start as a sole trader next year and started looking into it again. I copped that I should have de-registered. I never traded so I never filed returns or anything as I now gather I might have had to. I want to de-register, (if that's the right thing to do) but don't want to bring trouble down on my head. Would I get in trouble? :eek:

dbran

Hi

You do not need to de-register your business name with the CRO in this circumstance. It will remain active indefinately.

This is not the same as registering with the revenue as a business. If you already have done this in the past then you do need to de-register as self employed with them as otherwise you will be required to file income tax returns for all the previous years.

Kind Regards


Dbran

Notanumber

Thank you very kindly for your reply, I thought I had really messed up. That's a relief! I never got as far as registering with revenue but plan to do so next year as a sole trader. Thank you again, I can plan properly now without worrying.