Side project as a business (SaaS)

mcbert

Hi all,



I'm in IT, have some ideas for small cloud based services (micro SaaS) that I plan on trying out. But I also have a good job, young family, commitments etc that I'm not going to risk until any idea has proven itself, and it could take time while I learn, several tries, and a few different projects running concurrently before I find one that pays...


What I want/hope is to be able to set up a small business entity that has tax completely independent of my own finances. Is that possible? If it makes some money, I won't even take any of it out as income for the start at least.



My family shares an accountant for a small bit of property, he does our annual returns etc, so I'd like my business to be independent of all that, use a different accountant for my business, not even necessarily have tell or our shared accountant about this separate business of mine, not be part of my own annual returns to revenue.



Is this possible?


Many thanks!

Yes there are agencies you can hire that can set up a company for you. I’d wait until I got some revenue but it’s possible.

JMR

Yes, completely possible.
Check the terms and conditions of your contract to ensure you are not in violation of any company rules and if not, you need not even tell your employer if you don't want to.

Find a good accountant, they will advise on company formation etc and tax implications, dealing with Revenue and so on.

Best of luck with it!

mcbert

Ah yes, my existing contract... also software related, but a different industry, no impact on my day job, so I'll just say nothing...

Great. Thanks.

I do or will in time need advice on if or how to handle VAT on services to customers in different countries. Would an individual accountant advertising services locally be as able as those larger agencies to help with that sort of thing?

(I'm not planning fast growing, highly funded startup here, just a side business that will hopefully grow as far as a nicely paid full time job, for just myself)

JMR

mcbert wrote: »

I do or will in time need advice on if or how to handle VAT on services to customers in different countries. Would an individual accountant advertising services locally be as able as those larger agencies to help with that sort of thing?

Find an accountant that you trust and feel comfortable with.
If they need specific advice on a particular topic, they will know who to bring in for a consultation.

Axwell

mcbert wrote: »

My family shares an accountant for a small bit of property, he does our annual returns etc, so I'd like my business to be independent of all that, use a different accountant for my business, not even necessarily have tell or our shared accountant about this separate business of mine, not be part of my own annual returns to revenue.

Just focusing on this section of your OP - as a director of your business, you will be responsible to do company returns and subject to taxes etc as normal. If your current accountant looks after your annual returns it wouldn't really make sense to hide this business and any income from it as they will need to be reported to revenue. You don't want one accountant making a return on your behalf with half the information and then the other one submitting a whole other set of info. I would be open about it and whatever way you work it you can obviously have one look after the property side of things and another your business just making sure that any returns at year-end are consolidated to have all the information due to revenue.

SEPT 23 1989

How can any income tax be independent from your name?

mcbert

SEPT 23 1989 wrote: »

How can any income tax be independent from your name?

The business would be a side project that I grow over time, work on in my free time. I would not take any income out of the business initially. The hope was that if I keep any profits within the business, do not pay myself at all, my personal tax returns would not involve the business, and it would be entirely independent of our existing accountant. But ok, perhaps it isn't as simple as that. I'll think more about the advice from other posters, above.


Thanks everyone!

BnB

mcbert wrote: »

The business would be a side project that I grow over time, work on in my free time. I would not take any income out of the business initially. The hope was that if I keep any profits within the business, do not pay myself at all, my personal tax returns would not involve the business, and it would be entirely independent of our existing accountant. But ok, perhaps it isn't as simple as that. I'll think more about the advice from other posters, above.


Thanks everyone!

I think it really is as simple as you said.

As long as you don't take any money from it, then it is nothing to do with your personal tax returns and could be independent of your existing accountant.

Setup your company and your company bank account. Any income for the company, goes into the company account and any expenditure for the company, comes out of it. As long as you are not taking any money out of the company account for personal use, then it doesn't effect your personal tax returns.

At the end of the year, if the company makes a profit, the company will have to pay corporation tax (12.5%) on that profit when your company accountant completes the tax returns.

Important to note though, that does not free you up to just spend the rest of the profit after tax yourself (outside the company). That is still just company money and if you want to free it up to use personally, you will have to take it out and pay income tax on it.

ironclaw

mcbert wrote: »

Ah yes, my existing contract... also software related, but a different industry, no impact on my day job, so I'll just say nothing...

Speaking as someone who runs their own SaaS, I'd read your employment contract really carefully and get legal advice if you are unsure. The fact that's its a different industry, language, no impact on day job etc can make little difference in what the company owns if your employment contract is pretty strong. Most IT contracts are very strong given the tendency for people to jump ship and create startups.

For example, if you use a concept of your employers, a design pattern/method or wrote some code on their equipment, you could land yourself in trouble later on.

The last thing you want is a successful launch and for your employer to come knocking for a slice.

spoiler

You will need to set up a company this entails filing tax returns with revenue and also filing an annual return and accounts with the companies registration office. If you set up a company and then decide not to go ahead with the idea you will still need to file accounts with the revenue and CRO. If you want to get rid of the company you will need to have it struck off which involves forms with the CRO and placing an ad in a newspaper which is the most expensive part. If the company makes a profit you will pay 12.5% corporation tax you may also have check that the company could come under surcharge and be charged 20% for any distributed income.
If you go as a sole trader you will pay tax on the profit of the business. You can withdraw as much money from the business as a sole trader that you want this is not taxed it is the profit of the business that you pay tax on which would be post likely at c.50% as you say you have other income.