owner of a company but also PAYE worker

Jacob55

Apologies, I have posted a similar question over in the entrepreneur thread but the situation has changed slightly.

My sister has asked me to be the director of a company she is setting up. I initially thought it would be just that, a named director, but now she wants me to be part owner (50%). I will not take any salary or pay from this company.

I am a PAYE worker elsewhere but I am worried that being a part owner of a company (even if I never receive a cent from it) may have tax implications and particularly PRSI implications.

Any advice much appreciated.

Cheers

barneystinson

Jacob55 wrote: »

Apologies, I have posted a similar question over in the entrepreneur thread but the situation has changed slightly.

My sister has asked me to be the director of a company she is setting up. I initially thought it would be just that, a named director, but now she wants me to be part owner (50%). I will not take any salary or pay from this company.

I am a PAYE worker elsewhere but I am worried that being a part owner of a company (even if I never receive a cent from it) may have tax implications and particularly PRSI implications.

Any advice much appreciated.

Cheers

It makes absolutely no sense whatsoever from your sister's perspective to have you owning half of her business, especially if you're not going to be actively involved in it.

e.g. If she does well and the company is worth 5 million in ten years time, you could decide you want a piece of the action...

It would make much more sense if you were a director and not a shareholder.

From the tax / PRSI perspective:

If you own more than 15% of the share capital and the company is trading, you become a self assessed taxpayer, regardless of whether or not you draw a salary from the company. This means you will have to file a tax return every year by 31st October.

There is no immediate PRSI implication; you will continue to be a Class A contributor in your regular job. However your status as a proprietary director would make it more complicated and difficult to claim any social welfare entitlements in the event that you became ill or made redundant.

Tread carefully.

Pandoras Twist

Im not sure but wont the OP also become responsible for the directors duties whether he takes a role in the company or not e.g. keeping proper books of account. And if the company doesn't he can be held personally liable.

nompere

Pandoras Twist wrote: »

Im not sure but wont the OP also become responsible for the directors duties whether he takes a role in the company or not e.g. keeping proper books of account. And if the company doesn't he can be held personally liable.

Yes and yes.

Jacob55

Thanks for the advice guys,
I am reconsidering the whole thing now and it is likely I will tell her that I would prefer not to be involved.

Cheers
JJ