Setup company before releasing iphone app?

Obscure

Hi,

I've been working on developing a paid iphone app. I think its a great idea and could be big seller (but doesn't everyone!!!!)

I was wondering if for tax reasons and libability if its necessary to setup a company before releasing it? Or is setting up a company just to release an app overkill? If it was a big seller would I be then libable to pay tax on earnings etc?

Has anyone had a similiar experience?

Tks, Ob

Draco

You're liable for tax one way or another. You won't have to worry about VAT though as Apple deducts that for you which is one less bit of hassle. Unless you think you'll be sued because of something your app does, just register yourself as a sole trader with the tax man and file electronically next year.

I've the one paid app (ironically a tax calculator) and I just lump in the (admittedly small) revenue in with my other sole trader income.

Dean_Mc

I don't know if I would bother setting up a company per se but I would always follow the advice of putting half of all product sales into an account to acrue intrest and then use the that account to pay the tax man, on time, every year.

Obscure

Generally, how much would you owe the taxman from app sales anyway?

If Apple sent you a cheque for a 1000e (they have taken their cut already), how much would you pay in tax?

Draco

Depends on your other earnings.

Based on these assumptions (and remembering I'm a software developer not a tax consultant and I don't have all the numbers in front of me):
* You make €1K a month from your app
* You are in a job that pays more than €36400 a year

You'd make €12000 and owe 41% tax and 8% PRSI and 2% levy so you owe the tax man €6120 at the end of the year.
Remember you can claim legitimate expenses (e.g. dev license) to offset some of the tax.

If you're not working, you can make up to €18300 without paying tax but you'll still have to pay the levy (and some PRSI but I think it's only 4%).

Also - this will all change for the worse after the next budget.

tomED

Setting up a company at this stage is overkill, unless of course you want to tie other parties into the ownsership of the software.

There is so much red tape with a company, including annual returns etc that it's just way too much hassle unless you think you could really benefit being a company in some way.

For example, you might get to a stage where you realise that you're making 100k a year and rather than pay income tax on the full amount, you could pay corporation tax on it at 12.5%

But I personally wouldn't worry about that until you started seeing the money coming in!

KrisW

+1 to TomED's advice. My accountant advised me that as a rule of thumb, setting up a limited company is not worthwhile until your turnover hits around €100,000/year.

Below that, you'll be a Self-Asssessed income tax payer, basically "Self Employed". You don't need an accountant to do this, but it can be worth your while. Accountants charge between €500 and €1000 for self-employed year-end accounts, but can save you more than this. All your income is assessed, not just your self-employment: this is a good thing, as in a bad year, your self-employed costs can be offset against your day-job income.

Regarding allowances, other things that you can claim for would be your computer equipment, handset and subscription (for multiple devices if you have a business case for them), and office equipment or furniture, postage, a limited amount of travel costs (if you visit potential clients, for example). VAT registration is a separate matter, and if your turnover is below 30k, it's an optional choice: it can be beneficial, or not, depending on what your other business interests are.

The best way to find a good accountant is by recommendation, so ask around.