Starting a business, need advice on limited company, expenses etc

davidom2513

Hi,

I am currently in the process of starting my business. My website is ready to go, and I have registered my business name. However, there are a number of things I'm not sure of, and could really use some advice.

1) I decided that I would register as a limited company because I am already working full time and I am at the tax threshold, so if I register as a sole trader, every penny I earn through the business would be taxed at 40%. Would you agree that this is the best option?

2) I have ordered in my first stock, paying through my personal bank account. I need the stock now because I want to be selling for Christmas. So the question is, how do I put this down as a expense of the business once its up and running? And can I start selling the goods and then put it in the accounts of the business once its set up?

3) What order should I do things in? Should I set up a bank account now and then register the business? And then start to put my personal expenses in the business, is that ok to do?

I'm so confused and flustered

Spanish Eyes

Contact these people as a start. They specifically support new businesses with information and advice.

Best of luck, hope it works out for you.

https://www.localenterprise.ie/About-Us/Services/

duploelabs

davidom2513 wrote: »

Hi,

I am currently in the process of starting my business. My website is ready to go, and I have registered my business name. However, there are a number of things I'm not sure of, and could really use some advice.

1) I decided that I would register as a limited company because I am already working full time and I am at the tax threshold, so if I register as a sole trader, every penny I earn through the business would be taxed at 40%. Would you agree that this is the best option?

2) I have ordered in my first stock, paying through my personal bank account. I need the stock now because I want to be selling for Christmas. So the question is, how do I put this down as a expense of the business once its up and running? And can I start selling the goods and then put it in the accounts of the business once its set up?

3) What order should I do things in? Should I set up a bank account now and then register the business? And then start to put my personal expenses in the business, is that ok to do?

I'm so confused and flustered

Is it just you running the business? If so then there's no need to register as a Ltd company as any income you make from it will be taxed at the higher threshold, although I bet you your accountant advised you to register a a Ltd as they would then need to produce annual books for you and thus charge a full fee

davidom2513

Spanish Eyes wrote: »

Contact these people as a start. They specifically support new businesses with information and advice.

Best of luck, hope it works out for you.

https://www.localenterprise.ie/About-Us/Services/

I am currently doing a "Start a Business" course through local Enterprise office. But these specific questions aren't answered. Its just general information

Thank you

davidom2513

duploelabs wrote: »

Is it just you running the business? If so then there's no need to register as a Ltd company as any income you make from it will be taxed at the higher threshold, although I bet you your accountant advised you to register a a Ltd as they would then need to produce annual books for you and thus charge a full fee

Yes, its just me.

I don't have an accountant.

The reason I am considering a Ltd company is that I can keep the money in the business for the most part, and then if I decide to leave my current job, I will then be taxed at a lower rate with the money I make from my business.

40% is just so much to be paying on my profit, it just makes it seem pointless to me when I'm just starting out..

jimmii

If you keep the retained profits in the business you'll pay tax on them then and then pay personal tax on the money when you do take it out in the future so the savings might not be that big. In the UK you can pay yourself a £5k dividend tax free is there any tax free allowance in Ireland you could use to take money out that way?

pedroeibar1

davidom2513 wrote: »

Yes, its just me.

I don't have an accountant.

The reason I am considering a Ltd company is that I can keep the money in the business for the most part, and then if I decide to leave my current job, I will then be taxed at a lower rate with the money I make from my business.

40% is just so much to be paying on my profit, it just makes it seem pointless to me when I'm just starting out..

You need to get an accountant, don't be penny wise and pound foolish.

The company has to pay tax on its profits, you will have to pay tax on any dividends it pays to you.

To understand the legalities surrounding the choice of a Limited Co or Sole Tradership, read this post

endacl

Also, check into social insurance implications. Your PRSI status may be effected as a director.

You will also come under the remit of the Companies Act. The Institute of Directors publishes a handbook that it would be well worth your while having a read of. Costs about a tenner. If you go the Ltd company route (or more likely CLG) governance becomes a big issue, and the high court doesn't care if you're 'running a small business on the side'. A director is a director is a director.

Last point. If the company invests in assets, they belong to the company as a seperate entity. Not to the shareholder(s). There may be tax implications if and when you wind up or sell the business.

You may be told that 'all if that stuff doesn't really apply to a small business like yours', but it does. There's no 'sure I just wanted to set up a small operation. It's not really a 'company' company' provision in the legislation.

There's nothing wrong with being a sole trader. The perceived protections of incorporating can be insured against and deducted.

endacl

Oh. Forgot. The stock you paid for? That wouldn't be a company expense as the company doesn't exist yet.

Glass fused light

davidom2513 wrote: »

2) I have ordered in my first stock, paying through my personal bank account. I need the stock now because I want to be selling for Christmas. So the question is, how do I put this down as a expense of the business once its up and running? And can I start selling the goods and then put it in the accounts of the business once its set up?

3) What order should I do things in? Should I set up a bank account now and then register the business? And then start to put my personal expenses in the business, is that ok to do?

I'm so confused and flustered

If you stay as a sole trader open just a business account with a bank and don't run the business through a personal account:
1) the bank charge more fees on a business account and you break your current contract with them. Read and understand the terms and conditions of the business contract you are signing.
1a) It may be beneficial to open the business account with another bank or move to transfer your personal banking to a new institution; this segregates your personal cash from the potential of a cross charge and cash appropriation by the one bank.
2) you split your personal costs out from the business and if you get an accountant you just hand over the business statements so less work for them.
3) Your personal and business bank accounts are easier to audit by revenue, so if audited you don't have to explaning the holiday was personal expenditure etc and not hidden in the business costs.
4) you have a quick and easy snapshot for a cashflow system: bank balance + outstanding sales due - unpaid bills -vat & tax due to be paid = possible wage
5) better still open a deposit account for vat and tax, this is not 'your' money just short term borrowings, vat+tax+profit=sales-cost of sales so if you are dipping into it regularly to pay bills look at your cashflow, dr days and cr days.

If you incorporate, your company opens the accounts in the business name, the director(s) fill in the paperwork and it is likely that the bank will require personal guarantees. The purchase of stock would be a promoter cost or director loan (< there is strict legislation on this), or payment for shareholding + premium or no profit sale from you to the company. As pointed out if you go down ths route you need to understand your obligation as a director.
Edit to follow up on what Endacl pointed out, any sales between now and a company being set up are as a sole trader.

mrawkward

First off OP, stock is an asset not an expense, you really do need some external help here on the basics of accounting .
Lots of side buisinesses like this are run through a personal bank account, without issue.

davidom2513

Thanks for all the advice everyone

I'm currently looking into accountants in my area who can help me get my house in order.

Does anyone know how much an accountant would charge for their time, roughly? Just for a meeting to discuss things?

Also, regarding the stock I bought with my own money, what if the company bought all the stock off me? Could I do it that way?

mrawkward

You are a sole trader, there is no company! As to what they would charge... You are clearly in need of both advice and a fair bit of handholding... Think €100 an hour. Make a few calls and get priced proposals.

PARlance

davidom2513 wrote: »

Thanks for all the advice everyone

I'm currently looking into accountants in my area who can help me get my house in order.

Does anyone know how much an accountant would charge for their time, roughly? Just for a meeting to discuss things?

Also, regarding the stock I bought with my own money, what if the company bought all the stock off me? Could I do it that way?

Rather than just getting a list of accountants and calling them, do your research through other local businesses. Ask business people who they use, how they find them, what they charge etc.

Finding a good accountant can be hard, favour advice from established small businesses as they'll probably have been around the block themselves.

davidom2513

mrawkward wrote: »

You are a sole trader, there is no company! As to what they would charge... You are clearly in need of both advice and a fair bit of handholding... Think €100 an hour. Make a few calls and get priced proposals.

Obviuosly I know there is no company as of yet, I'm talking about setting up a limited company like I said in my OP.

davidom2513

PARlance wrote: »

Rather than just getting a list of accountants and calling them, do your research through other local businesses. Ask business people who they use, how they find them, what they charge etc.

Finding a good accountant can be hard, favour advice from established small businesses as they'll probably have been around the block themselves.

Thanks, I'll look into doing just that

mrawkward

davidom2513 wrote: »

Obviuosly I know there is no company as of yet, I'm talking about setting up a limited company like I said in my OP.

It is not al obvious that you are setting up a limited company and this is a decision you should carefully consider. It is an onerous and more expensive option compared to sole trader. Again you need advice as you do not appear to comprehend the issues involved and thus are not in a position to make an informed choice.
Stock is still not an expense and whether you buy it personally and then sell it on to any company at cost is quite irelevant. Get help.

duploelabs

davidom2513 wrote: »

Obviuosly I know there is no company as of yet, I'm talking about setting up a limited company like I said in my OP.

I can only see any benefit in setting up a ltd company as opposed to sole traders is if you're taking investment, rather than a set up loan, and thus would have to issue shares. Or indeed, if you want to go to the bank to make sure you've a limited risk to yourself against the borrowings. Otherwise you've no reason to go through the added expense and hassle of setting up as a ltd company and should just stick to being a sole trader