Following on from my last blog on how to set up your business, this week’s focus is on the determining factors that can help you decide whether the sole trader or limited company option is best for you.
When deciding which best suits your needs, the most important thing to take into account is your forecasted profits and how much your turnover is likely to be year-on-year.
A lot of people, when setting up a business, get hung up on details like having the appropriate measures in place when it comes to registering with the CRO and how they have to go about registering for various tax heads that relate to the sector that they will be entering. While it’s a prudent practice, it’s not nearly as daunting as some think.
Setting up as a sole trader is relatively painless and the process is much quicker than the limited company route. The same applies to a partnership if there are two or more people involved in getting the company off the ground. In both instances, the criteria and characteristics are very similar and the paperwork requirements are minimal.
Before you decide on setting up as a sole trader or partnership, ask yourself if you are likely to earn over €36,000 in your first year. If you feel you’ll be taking home in and around that figure, you’ll pay tax of 20% on the first €36,000 and 48% tax on anything above that.
However, if you believe, having carried out some research into your market and calculated projected sales figures, that it’s likely that you’ll earn much more than that, then a limited company is the route you should take.
To set up as a limited company, however, a company needs to be formed and it has to be registered for taxes. However, the real differentiator between the two is projected profits. If, for example, a single person goes into business and their profit forecast is in the region of €100,000, then we would advise them to set up a company. There is, however, more paperwork involved and annual accounts and bridged accounts must be filed with the companies office.
How can DCA Accountants and Business Advisors help?
First of all, having discussed your business with you, we’ll decide on the appropriate structure. Once all the paperwork has been handled, our advisors ensure that you are fully aware of the checks and records that must be kept throughout the year.
In a lot of cases, a new company wants to concentrate on getting their business up and running so, at DCA, we can manage all of your records throughout the year ahead of filing annual accounts on your behalf, regardless of the structure that is most suitable to you.
In the case of a limited company and on top of the necessary paperwork, the team here can register your business for VAT, PAYE and all other necessary tax heads. We can also assist in securing finance for your business whether that is an overdraft or term loan to get you started.
Once your company is up and running, our dedicated bookkeeping department can help you issue timely sales invoices and even follow up with your clients to ensure that payments are being made and processed on time.
When you are setting up a business, it can be very easy to lose sight of your core objective, especially in the beginning when there seems to be so much red tape to get through. We’re here to help you and your company get off to the best start possible, and with our expert team behind you, you can concentrate on why you set up the business in the first place.
DCA Accountants and Business Advisors