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What to do?? PAYE - Register as Sole Trader or Ltd??

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  • 12-02-2013 3:02pm
    #1
    davegilly
    Registered Users Posts: 680 ✭✭✭


    Hi

    I have started a small business that is starting to make some money. I haven't registered it yet as it was more of a hobby until recently but I will now be registering for tax however I am unsure of the best course of action for this.

    My current situation is that I am a PAYE worker also and earn approx €45K plus have a company car/phone/Medical etc and pay all the associated BIK on that. My new business venture has the potential to earn me an additional €20K this year (that's what I have projected for this year with the current info available to me, it may be more but not much) and in all liklehood it will probably stay as a part time business for the forseeable future.

    My wife is currently on maternity leave (she receives only the government maternity benefit as her company don't pay anything) and receives approx €281 per week (I think!) She is due to go back to work at the end of March but more than likely will extend her leave until August unpaid. Her salary is €48K. I am not currently claiming any of her tax free allowance as she claims back all the tax owed at the end of March and uses this towards living expenses while on unpaid leave.

    Now ideally my wife would prefer not to go back to work at all in August and stay at home and mind the children (we have 2) so what is the best way for me to operate everything financially?? If she stays at home then obviously I would get her tax credits, about how much would this add to my take home PAYE salary??

    If I register as a sole trader for the business (I am essentially providing a service rather than a product) what are the implications on tax for me and my wife.

    Would I be better off registering as a company and "hiring" my wife to do the asmin side of things and paying her a salary thus reducing the tsx liaability??

    Does anything affect my current PAYE job as I really don't want them to know anything about my sideline business.

    I know I need to go see an accountant but I wouold love to get some ball park info first so I know where I stand with everything.

    Thanks very much for your help


Comments

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    #2
    dbran
    Moderators, Business & Finance Moderators Posts: 2,094 Mod ✭✭✭✭dbran


    Hi

    There is far too much to be covered here back and forth on a thread. You need to go see that accountant methinks.

    Kind Regards


    dbran


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    #3
    Trend Setter in Training
    Registered Users Posts: 302 ✭✭Trend Setter in Training


    First and foremost you are right, you should go to see a qualified accountant with experience in the area. Where are you based?

    There are a huge number of variants in your statement above that would throw up a huge number of benefits / potential liabilities.

    You shouldn't actively hide the 'sideline business' from your employers as you might be breaching you contract, you should examine the fine detail there and be upfront with them. Most employers would be excited about such entrepeneurship and might work to your benefit in the longrun. Unless you are actively going to be a competitor in which case you will be most definitely in breach of your employment contract.

    All that being said with those sorts of volumes (I assume you mean sales of €20k) you would be in most cases best served to stay as a sole trade as the reporting / admin of a ltd company may be cost and time prohibitive. Again, depends on further growth potential.

    The tax saving you would make, after march when wife claims back her tax would be the tax you pay at the higher rate of tax. Ie at them moment in simple terms you have a stanard rate band of €32,800 @ 20%, this would increase to €41,800 if you took part of your spouses entitlements and therefore €9,000 that would have been taxable at 41% now at lower level of 20% saving you €1,890 in tax. (Although if your wife is using up to march then you will only be entitled to 9/12 of the year for 2013)

    You would also be entitled to her PAYE credit of €1,650 (again as above only entitle to 9/12 of it for 2013)

    If you go down the sole trade route you would have complete a form 11/12 to return the income for the year along with details of your PAYE income. As a sole trade you would have certain benefits, I find there are many good general sites to give you an idea of these, such as http://parfreymurphy.ie/sole-v-co/ (Ps i do not work for or have any involvment with them but one of the first that come up in google search and i have used a few times myself)

    All the above are fairly generic examples based on details you have provided. If you see genuine opportunity to grow the business in the future then could then be an opportunity to incorporate and get your wife involved when she has a bit more time when kids are in school ect.

    If you want any other info you can PM me but as i said in opening, heed your own advice and go seek professional guideance.

    Hope that helps.

    TST


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