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Holding off paying myself in a LTD Company

  • 25-04-2007 10:56am
    #1
    tyler_d
    Registered Users Posts: 70 ✭✭tyler_d


    Im setting up a limited company and my funds are fairly restrictive. I am the director but i am also the only employee. Obviously i have a yearly salary but can i hold off paying myself for a few months until i get credit from my suppliers and then pay myself later, the money from the previous months unpaid?


Comments

  • #2
    Brixton Uptight Aerosol
    Closed Accounts Posts: 1,806 ✭✭✭ Brixton Uptight Aerosol


    tyler_d wrote:
    Im setting up a limited company and my funds are fairly restrictive. I am the director but i am also the only employee. Obviously i have a yearly salary but i hold off paying myself for a few months until i get credit from my suppliers and then pay myself later, the money from the previous months unpaid.
    Is that a question or were you just keeping us all up to date? :-)


  • #3
    tyler_d
    Registered Users Posts: 70 ✭✭tyler_d


    Yup, i forget the 'can' in that sentece followed by the question mark.


  • #4
    Brixton Uptight Aerosol
    Closed Accounts Posts: 1,806 ✭✭✭ Brixton Uptight Aerosol


    I'm not an account but I think you're free to structure it how you want.


  • #5
    Hanley
    Banned (with Prison Access) Posts: 21,981 ✭✭✭✭Hanley


    Most firms pay monthly... I can't see why you wouldn't be allowed pay yourself quarterly if you wanted to...


  • #6
    Leon11
    Closed Accounts Posts: 578 ✭✭✭Leon11


    Ye there's no problems with it all. I think it may affect the amount of tax you have to pay though.


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  • #7
    kluivert
    Registered Users Posts: 2,399 ✭✭✭kluivert


    As a director of the company you are an employee, the only difference is that directors PRSI class is S and not A

    Yes you can structure what you pay yourself when you pay yourself


  • #8
    Naked Giant
    Closed Accounts Posts: 4 ✭Naked Giant


    Yeah think of it as a zero salary and a huge "performance bonus" at the end of the year!


  • #9
    Leon11
    Closed Accounts Posts: 578 ✭✭✭Leon11


    kluivert wrote:
    As a director of the company you are an employee, the only difference is that directors PRSI class is S and not A

    what I was trying to get at, can't even remember last semesters tax ****e:D


  • #10
    PRman
    Registered Users Posts: 269 ✭✭PRman


    Yeah I don't see a problem doing this. There is some law about Directors taking loans from the company (can't be more than 10% of turnover???) so once your not doing that


  • #11
    spaceballs
    Closed Accounts Posts: 26 ✭spaceballs


    There's no problem, you can pay youself as much or as little as you want each month, cash flow allowing obviously, just make sure to return the PAYE/PRSI on whatever you do actually end up paying yourself!!!!

    It wasn't part of the original question but just on directors loans, the company cannot loan a director more than 10% of the company's net assets, it's in breach of company law. However even if the company gives a director any loan, no matter how small, technically the company should pay tax on the loan to the revenue, then when the director repays the loan the company reclaims the tax from the revenue. I think this is subject to a 6 mth cut-off.


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  • #12
    deebm
    Closed Accounts Posts: 11 ✭deebm


    you can provide for a monthly salary, & pay PRSI & tax on it in monthly P30's and allow the net amount to build up in a directors current account, which you can take at a later date.

    The alternative is not to account for PAYE & tax on monthly basis but to provide for 'bonus' at end of year and submit on P35 and then pay tax liability. You would then take the net salary yourself as available (in effect also use the directors current account) HOwever the revenue can penalise you if you do not have a certain percentage of your PAYE/PRSI liability paid until the year end.


  • #13
    EKRIUQ
    Registered Users Posts: 4,386 ✭✭✭EKRIUQ


    Here's another way of dealing with payments to your self

    The most important thing is to consider whether you should be paying yourself salary or a loan to your self.

    If you need long term working capital, then leave profits in the company and pay tax on them at the lower Corporation Tax rate so that you can use the retained funds to repay the loan.

    If you expect the company to be profitable in the long term, you should pay yourself a salary up to the maximum of the 20% tax rate before repaying the loan.

    If the company is losing money and there is a risk that it might go into insolvency, then you should be repaying the loans before taking any salary.

    I have seen many cases where companies have gone into liquidation owing their directors money where the same directors seem to have got salaries which were presumably taxed.

    If the amount needed by the company is large, you might consider buying some expensive asset and leasing it to the company. That means that if the company fails, you will still own the asset. Leasing is messy from a tax point of view - so this probably only applies to property.

    Bingo


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