Do I need to register as a company?

NotAnotherOrange

My accountant has advised me to set up a company to be more tax efficient, but I'm not sure how much it will benefit me.

For a bit of background I had earned as a self employed person around 45,000 euro in 2020 and that has grown to over 200,000 euro in 2021.

This is mostly through YouTube so I have very few expenses and outgoings in order to do my job. As a sole trader I was still able to take things like computer hardware and monitors off the profits to reduce tax liability, but obviously now it's over 200,000 I'm losing around 50% of everything I earn.

The accountant said that instead I could pay myself a smaller amount and then use any remaining money in the business for pension payments, or even to invest into property and stocks and shares and take out any profits whenever I want.

Is moving to a limited company as a director a no brainer at that level of income? It's nice taking home a big amount of money every month but realistically I don't need anything like 200,000 a year income right now and even if I needed access to the money I could just ask the accountant to pay me more in any given month and just pay the same amount of tax I'm paying now anyway.

I'm just a bit clueless about this stuff and not sure how much I'd want to invest in other stuff anyway.

Tow

I don't see any advantage to you. Except it adds an extra layer if you get sued. The profit left in the in the company after paying a salary etc will be taxed at 15%.

silver2020

https://www.boards.ie/discussion/comment/118407809#Comment_118407809

12.5%

Only very large companies will be in taxed at 15%

Op may be able to avail of s348c tax relief for new companies for first 5 years.

Op, as director can put larger amounts into pension, again minimising tax and providing cushion for the future.

The additional costs are minimal, so very good advice from the accountant.

I'd be looking at doing this immediately so that it corresponds with the tax year

NotAnotherOrange

https://www.boards.ie/discussion/comment/118407869#Comment_118407869

That's basically what accountant said - have it going from Jan this year so it's a full year ahead of us.

Just need to decide which bank to set up a business current account with (I still need to switch my personal Ulster Bank account too).

Pension seemed to be the main thing. Is there less hassle with tax for investing into stocks and shares via a business?

Accountant was basically saying I'd have more money left in the business to try and make more money, rather than taking the 50% hit and then having less money to invest.

What are the best things to invest in as a business?

Unfortunately I don't need things like car for my business.

gudede

I would agree with your accountant, once you don’t take all the company profits out as a salary.

gary550

You're accountant is on the money, listen to him.

NotAnotherOrange

https://www.boards.ie/discussion/comment/118408478#Comment_118408478

Yeah that's the plan.

Maybe take 50-60k instead of the whole 200k.

I guess my question is apart from putting a huge chunk into pension - what other fun things can I do as a business because of the tax savings that I can't do currently? What type of things are worth looking at for investment?

gudede

Nothing immediate, but CGT relief (long term) is a huge benefit (€1m tax free). You can set up company saving schemes to get your money working (speak to financial planner). You also have the benefit of employing your wife (if/when you have one). But, the main benefits are less tax and limited liability. 

Always remember, the money now belongs to the company and not yours.

CPTM

https://www.boards.ie/discussion/comment/118411167#Comment_118411167

Are you saying that a company/business can invest in stocks and shares and not have to pay capital gains tax on anything up to 1 million euro? I thought there was a 10% tax there which means you would be at a loss unless the shares rose above 10%. Just interested for myself actually.

NotAnotherOrange

https://www.boards.ie/discussion/comment/118411167#Comment_118411167

The benefit of employing my partner doesn't matter if she already has a job though right?

Company owns the money but that extra money can be used to make more money I assume would be the plan, so that even if I take more it will have made more (in theory...)

gudede

https://www.boards.ie/discussion/comment/118411210#Comment_118411210

No sorry… €1m is in relation to closing/selling the business and the assets contained in the company.

Company can invest but are subject to CGT and Exit Tax. There might be better investment vehicles for companies, but I always point people towards a Wealth Management Company for advice. I can forward you details of a company if you want. (Just pm me).

gudede

https://www.boards.ie/discussion/comment/118411303#Comment_118411303

Depends…Overall, my comments are generic as I don’t have all the details.

You could employ her just to allow the company to pay a pension on her behalf. No point in you having a €2m pension fund at retirement. The amount is better off been split between two of you (more tax efficient).

NotAnotherOrange

https://www.boards.ie/discussion/comment/118412730#Comment_118412730

Yeah sure, forward me the details if that's okay.

I'm a bit clueless in terms of how to make the money work. No point going company route if I'm just going to leave it in there.

https://www.boards.ie/discussion/comment/118412762#Comment_118412762

Okay gotcha, will have a think.