Setting up a Limited Company in Ireland...
If you’re thinking of setting up a business in Ireland and want to protect your personal interests, you should consider setting up a Limited Company. Unlike other common structures, such as a sole trader, directors and shareholders of a Limited Company can only lose the money they have invested in the business. On the other hand, if you are set up as a sole trader, you can be held personally responsible for paying off the debts of your business. Setting up a company will limit the risk you take and protect your personal assets.
Below, we’ve outlined the 13 steps you need to take to set up a Limited Company in Ireland.
- Appoint a director - preferably a resident in Ireland
- Choose a company secretary
- Know your shareholders
- Decide how many shares you should release
- Get a registered office address and business address
- Choose a company name
- Prepare and sign incorporation documents
- Purchase a company seal
- File a beneficial owner
- Register for tax
- Set up an Irish business bank account
- File your Annual Returns with the CRO
- File a director’s income tax return
1. Appoint a director - preferably a resident in Ireland
Every Limited Company needs at least one director. The director manages the company on behalf of its shareholders (we’ll get to that later). An Irish company must have at least one director who is a resident of an EEA country. If none of the directors are EEA residents, you’ll have to buy a non-EEA residents' bond before setting up in Ireland. Remember, this rule now applies to UK and Northern Ireland resident directors.
One of the benefits of locating a business in Ireland is its low corporation tax rate of 12.5%. To avail of this, a company must be able to prove that it is “centrally managed and controlled in Ireland.” Since it is the directors who control and manage a company, having directors who are residents of Ireland can help with this process. Where a company is deemed not to be centrally controlled and managed in Ireland or where its directors are tax residents elsewhere, they will not qualify for the 12.5% tax rate, even if they’re incorporated in Ireland.
2. Choose a company secretary
A company secretary is responsible for filing the annual returns on time every year. Missing this deadline can incur fines of up to €1200 and mean your financial statements can be audited for two years. You need to make sure your company secretary is an organised and trustworthy individual who will respond on time to deadlines.
If you have more than two directors, one of them can be the company secretary. Otherwise, you’ll have to assign someone new. You can also outsource the role to a corporate body such as Accountant Online.
3. Know your shareholders
Shareholders are the people who own a company. Shares are pieces of a business, divided among the owners. The more shares you have, the more of the financial returns you’re entitled to. Shares are also usually attached to votes, with larger shareholders getting more of a say in decision-making than smaller shareholders. For new businesses, the directors and company secretary are usually also shareholders in the business.
4. Decide how many shares you should release
Keeping that in mind, the amount of shares you want your business to have is a big decision. The division of shares determines who legally owns a company. If you have many shareholders, you will have many owners, although some of these owners will only have a few shares and so will have little control. Shares are issued when a Limited Company is set up, and more can be issued or transferred at a later stage.
A business will have authorised shares which is the number of shares you can give out, now or in the future. Authorised shares don’t impact the value of the company, since no one actually owns them; they are just available to be owned. It’s suggested that you authorise more shares than you intend to issue so there are shares available for future investors.
Issued shares, on the other hand, are shares that have been allocated to and paid for by shareholders. To start, it’s recommended to have 100,000 authorised shares and issue 100 of these at a value of €1 each. This means that a person who is issued 50 of these shares would have 50% ownership in the company.
5. Get a registered office address and business address
A registered office address is the official, legal address of your company. It must be a physical address that’s monitored regularly (not a post box). This is because important notices are sent to this address from the Companies Registration Office (CRO).
A business address is where company mail, like invoices, is sent. Don’t mix a business address up with a trading address. For example, you might be running your business and trading from your home but not want it to be your business address since it will be publicly listed. Instead, you might choose to use a business correspondence address to keep your home address private.
6. Choose a company name
A company name sets the tone for your whole business. It will be the base for your brand, the thing you want your customers to remember. It’s important you choose a name that fits you and your business.
However, be aware that the CRO has rules around the company names businesses can use. It must be unique and distinguishable against other names registered in Ireland. The Registrar will check your proposed name and can reject it, delaying your setup time.
7. Prepare and sign incorporation documents
There’s always quite a bit of paperwork involved with setting up a company. For a Limited Company, you must prepare and sign documents to incorporate your company. This process can be done online via the Companies Online Registration Environment (CORE). Or, if you want an expert to handle the process, you can outsource it to a company formation specialist such as Accountant Online.
8. Purchase a company seal
A company seal is an embossing tool with the company name engraved on it. It’s used to seal certain documents to mark them as official. A company seal is used on share transfers, and company and property law documents, to name a few. A Limited Company is required to have a company seal to act as confirmation that documents stamped with the seal are approved by the company and its directors. It can only be used by the directors of a company or with their approval. Use of the company seal must be accompanied with signatures from a director or other authorised person and the company secretary or other authorised person.
9. File a beneficial owner
A beneficial owner is anyone who holds more than 25% of a company’s shares. You need to register any beneficial owners with the Register of Beneficial Owners (RBO) on their website. This has to be done no more than 5 months after you incorporate your business. However, you should note that many banks won’t let you open an account until this is done, so sooner is always better than later. Failure to complete an RBO registration can result in fines or even conviction.
Majority shareholders will need to have a Personal Public Service Number (PPSN) to complete registration. If they don’t, they’ll have to complete a form called BEN2 or have a company formation specialist do so on their behalf.
10. Register for tax
Companies in Ireland have to register for tax with Revenue before they can trade and invoice customers. This is a different process from registering with the CRO and is usually done by an accountant. You may need to register for Corporation Tax, Value Added Tax (VAT), Relevant Contracts Tax (RCT), and Employers PAYE.
11. Set up an Irish business bank account
Before setting up a company bank account, you’ll need to have all your company documents. This includes your original certificate of incorporation, your company constitution and a copy of your A1 form. Most banks will also insist you file your RBO (see step 9) before they’ll allow you to set up an account.
Usually, to open an Irish bank account, one of the directors will need to have at least one face-to-face meeting with a bank representative. This is important to note if none of your directors live in Ireland. In that case, you might decide to set up an online bank account.
12. File your Annual Returns with the CRO
When you incorporate a company, you have to file Annual Returns with the CRO, even if you’re not trading. An Annual Return date will be allocated to your company, which you can check on the CORE website. The first Annual Returns date is due 6 months after the company is incorporated and no financial statements are required at this point. Companies then have 56 days to complete all elements of the Annual Returns, with heavy penalties incurred if you miss the deadline.
13. File a director’s income tax return
A director that is a beneficial owner of a business or who controls more than 15% of the ordinary share capital of the business is a proprietary director. They will need to file a self-assessed directors’ tax return via Form 11. The first of these is due by October 31st of the year following your company’s formation.
You need to file this return even if your director only has PAYE income or the company hasn’t begun trading or making money yet. Failure to do so might mean you have to pay fines.
Setting up a Limited Company is more complicated than setting up as a sole trader in Ireland. However, it does mean that the personal assets of both directors and shareholders are protected. If you do decide to set up a Limited Company, there is help available. Visit Accountant Online, where our award-winning service will assist you at any stage of your setup journey and beyond.