Setting up a Limited Company in Ireland has several legal prerequisites. This article outlines what you need to do in order to avoid making common errors.
This is a busy and certainly interesting point in your life, and you want to do it right. This article will help you start a company in Ireland.
The process to start a business in Ireland isn’t a painful one if you do things correctly and on time. You do want to tackle it right from the start. This is going to be your company and it’s vital you take it seriously.
Let’s look at all the things you should know.
The definition of a Limited Company
You will find a Limited Company also being referred to as a ‘Private Company’ which is ‘Limited by Shares”. This structure is the one found in Ireland most often.
The Limited Company (LTD) is limited in terms of their shares capital and liability. Smaller Limited Companies are exempt from auditing. This means you will not have to submit any financial statements for audit.
What is required for company formation in Ireland?
There are some essentials you need to ensure you have everything in place to set up your Limited Company.
Here are the things you need to set up:
- Company director
- Company secretary
- Share (ownership) framework
- Business address and registered office
- Company name and documents for company registration
- Company seal
- Business bank account
- Tax registration
Now, let’s expand each step of the process, in order:
1. Name your company director
You must appoint at a minimum of one company director. This individual manages the Limited Company on account of all the shareholders. For smaller companies, their Directors may also be their shareholders.
An Irish company must have at least one Director who is an official EEA country resident. If every Director is external of the EEA you must buy a non-EEA residents bond before any other action.
Say you have one Irish-resident Director and another EEA-resident Director. Here, you would not need to purchase this bond.
If your two Directors, for example, were based in the USA, you would be required to purchase the bond before being allowed to set up your Irish Limited Company.
A point to remember here is that your shareholders’ residency does not have an influence.
2. Appoint your Company Secretary
If your Limited Company has a sole Director you must appoint a separate Company Secretary.
If your company has two or more Directors, one of them can be appointed as Company Secretary.
Your company may outsource this role to a third party corporate body.
The major responsibility of the Company Secretary will be to submit the Annual Returns. Working closely with a company accountant, this person oversees the timely filing of financial statements. Fines of a maximum of €1,200 could be incurred for filing this after the deadline. Following financial statements would then be mandatorily audited for two years. To ensure you’re not penalised like this, you can employ a third party to file these Annual Returns on time.
3. Appoint a minimum of one shareholder
Your shareholders effectively own your company. In a startup the Director or the Company Secretary are usually shareholders.
4. Decide the number of shares you’re going to release
A share is a portion of your company that you give out. The shares you give away determines the percentage of ownership you or your shareholders has of your company.
You then issue those shares upon the set up of your company. For an Irish Limited Company there are 2 types:
“Authorised shares” are an ambitious number of shares you may issue either now or later. This type of share has zero monetary value nor do they impact your company’s value.
“Issued shares” are the amount of shares allocated and bought by shareholders. Say, for example, you issued one hundred shares to a single shareholder. That shareholder would own 100% of your company. Be mindful of how many shares you issue as this directly determines the owner of the company.
It is standard to authorise 100,000 shares and issue 100 at the value of €1. If you’re unsure of the appropriate structure to use for your shares, you can seek expert advice.
5. Set up both a Registered Office and Business Address
These two addresses are a requirement to register your Irish Company with the CRO.
Your registered office address acts as the legal company address. It has to be a real, physical Irish address and regularly monitored. Typically, the company accountant will be based here as notices are sent to this location.
Your business address is your trading location. If you’re an online entity or you work remotely it is advisable to look at setting up a Business Correspondence Address, which correspondence can be forwarded to.
6. Name your company
In 2019, 67 new companies were registered in Ireland every day.
When setting up a company, a name is likely one of the first things you want to do.
Practically, the company name has to be unique. You must be able to distinguish your company from companies already CRO-registered. The Registrar conducts a name check; if your suggested name isn’t good enough, your submission will be returned to you. This is not an unusual reason for submissions to be returned. You can employ a third party company to ensure you make a strong choice.
If you’re not feeling creative, there are tips you can find online to land on a company name. The company name has to meet certain guidelines. You’re able to check if that company name is already in use via the CRO Search Facility and/or Trademark Register.
You may also want to utilise the efficiency of a company registration expert.
7. Collate and sign your incorporation documentation
Following your company registration, you will be at the point where you have gathered all of the above you need to incorporate your Limited Company. You have two options for how to do this:
You can do this online through CORE (Companies Online Registration Environment).
You may also employ a company who specialise in this kind of formation. Often, using a third party to do this for you removes the stress and guarantees the documents are filed correctly.
8. Order a company seal for your company
Following the incorporation of your company and approval of your name you next need to buy a company seal. This must contain the company name, which should be engraved. You will need this to seal specific documentation, such as share transfers and paperwork relating to company and contract as well as property law.
You’re able to buy a company seal at the same time as registering your Limited Company so both are ready at the same time.
9. Open a business account with an Irish bank
When your company has been set up it’s best to then separate your business from your personal income. Opening an Irish bank account typically requires a meeting. You’ll need to bring your company documentation with you. This includes your company incorporation certificate, constitution and A1 form. These documents can be collated for you if you employ a third party.
10. Registering for taxes
A Limited Company must be in a position to pay Corporation Tax before invoicing any clients. Here we will cover what taxes a new company should be aware of registering for:
Every company in Ireland pays Corporation Tax, regardless of size. You must prove your company is registered, trades actively and is centrally managed within Ireland to qualify for the 12.5% rate.
If you do not qualify for the 12.5% rate, you must still register to pay tax. You’ll then be required to pay 25% Corporation Tax.
Your accountant or you must file all of your payments and also returns via the ROS (Revenue Online Service). The accountant will require a login for the ROS account.
Value added tax
Over the course of 12 months, if your business makes a turnover of more than €75,000 from sales you must register for Value Added Tax (VAT). You should register for this as soon as you feel you will exceed the given threshold.
Registering for VAT can be done online. You can hire someone to do this on your behalf. Once completed, you will be given a VAT number which means you can then reclaim VAT from business expenses.
Relevant contracts tax (RCT)
As a principal contractor, you will be required to pay RCT. This applies when you hire a subcontractor for completing tasks and representing your company. This only applies to the meat processing, construction and forestry industries.
If you’re going to hire staff, you must register your company for employer status. You must also create a payroll. You’ll be responsible for the deduction of PAYE tax as well as PRSI and USC from your staff’s wages either before or on the day of their payments.
This particular task can be very time-consuming. It’s wise to outsource this particular task to a professional body who can complete it for you.
11. Ensure you file your Annual Returns
After your company incorporation, you are required to file an Annual Return with the CRO. You must do this even in the case where you haven’t traded yet. Every company must comply with their Annual Return Date (ARD), which is allocated to them. You can check when this date is using the CRO’s Company Search feature.
Your B1 form, which is your Annual Return, should be submitted 6 months following your company incorporation. It’s key to remember you have a period of 28 days following this ARD to submit your Annual Return. The first of which will include information about your business.
This is something you can employ a third party Company Secretarial expert to do on your behalf to ensure the job is done correctly and on time.
Your next Annual Return will be due precisely 12 months following your first Annual Return. At this point, the accountant will be required to create a balance sheet as well as a profit and loss record and director’s report. An auditor’s report might be needed on an annual basis too. Financial statements and annual returns from here will always be filed on the same date each year.
12. Don’t miss your deadlines
If you miss your initial B1 form submission deadline, your company incur a fine of €100 then subsequent €3 every day until this is filed. Failing to submit your following B1 forms will result in the fine again, with the additional requirement of your accounts being audited for a period of two years.
Revenue Publishes List of Tax Defaulters every year
Your deadlines are very important. You would benefit from an expert managing this for you. Annual Return is a necessary process with consequences for missing your allocated submission dates. You can rest assured knowing a third party expert body will not fail to do this on your behalf.
In 2019, Google had to pay $549 million fine for tax evasion.
13. Submit your form 11 (Director’s income tax return) by October 31
Your company Director must complete a self-assessment income tax return annually. This is the same process as when a Sole Trader completes the same self-assessment. A director who owns less than 15% of the company’s shares, known as a non-proprietary director, must file a form 12.
Should you hire an agency to do your filing for you, this is something they can do on your behalf.
Now you’re ready to start your Limited Company in Ireland
Once you’ve gotten to this point, you’ve completed your company formation. Starting a company does not need to be painful. If you employ support and use the best resources available, your startup will be a success.. Good luck!