What are the benefits of setting up a limited company in Ireland?
Company Bureau Formations
03 April, 2019
One big question that faces entrepreneurs and start-up businesses is what type of business to set up. A lot of people and partnerships will start off with a business name or sole tradership. This business type works by paying taxation on the money you earn based on personal tax credits - like being an employee the full amount earned is taxed based on the standard tax bands. Entrepreneurs have the option to change over to a limited company at a later date but because of the many benefits of setting up a limited company is the most popular option.
Favourable Tax Rate
One of the key advantages of a limited company is the favourable tax rate. The corporation tax rate in Ireland on trading (buying and selling goods) is 12.5% on the profits of your business. This means that expenses come out of the money earned by the business and then what remains after the 12.5% is taken out can be paid to the shareholders (owners) of the business called a dividend. The payment of dividends can also be spread out or money can be re-invested into the business easily.
The Company Secretary
A company secretary is put in place to advise and assist the directors of a limited company to run the business. The secretary has the important role of while not making the day to day decisions, they guide in the best interests of the company. In many cases, a limited company will bring in an external secretary or secretarial company such as Company Bureau to provide this support, giving a limited company and its founders on-going back up and assistance.
A limited company is a separate legal entity form its owners with the advantage of limited liability. This means that the owner's personal assets are not at risk should the company not succeed. In the event of closure, Limited liability means that only the money invested and held within the business is liable to be paid out to people who are owed money by the business. This of course is dependent on the company operating within the law in all cases.
Business Freedom and the Constitution
The constitution of a company governs how a business operates. Unlike previous company law, a limited company can conduct any type of business rather than being restricted to one particular function. The constitution can be drafted to allow the company to do a variety of different things to make running it easier and more streamlined. These elements can be changed or inserted by a company secretarial company with ease and enhance the operation of a limited company.
Employer Tax Breaks
If your business is going to hire employees either part of full time, a limited company is eligible for a tax break in the first three years of operation. This means that, based on an employee's wages and the amount of tax the company has paid, a corporation tax bill can be reduced down to 0%. This tax break coupled with grant schemes and funds open to limited companies provide an easily realised advantage.
In all cases, a company is required to submit accounts and an annual return each year. This is similar to as a sole trader or partnership type business but happens in a more formal way for the limited company. The openness of this system makes it very easy for a profitable business to show potential investors, banks or other companies who wish to deal with them how strong their position is.
In summary, a limited company can be a brilliant commercial advantage in many ways to an entrepreneur or start-up group. This is a secure, flexible and attractive option to investors with tax friendly incentives which allow a business to focus on growth.
For assistance with any of the above information including registering a limited company and/or ongoing compliance once a business is operational please don't hesitate to pay us a visit on www.companyformations.ie.
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