New year, new start
One of the most remarkable aspects of 2020 was how coronavirus failed to dampen the Irish entrepreneurial spirit. While new company registrations fell sharply after the virus was declared a pandemic in March, by the third quarter of the year the numbers were slightly higher than in 2019.
Assuming this trend continues into 2021, thousands of new businesses will emerge, blinking into the low winter sun this month. Getting the basics right will give them the very best chance of success.
First-time entrepreneurs might not give much thought to the legal and financial structure of their new venture, but this is an important decision. Most will either opt for sole trader status or set up a private limited company.
The attraction of a limited company is that shareholders (who may just be the owner) are only liable for their investment in the business. The company is obliged to file an annual return even if it is not trading.
Most new enterprises are set up on a sole trader basis because it is the fastest and cheapest way of getting up and running. However, if the business grows rapidly and/or has intellectual property it wants to protect, switching to limited company status as soon as possible is probably the best option.
Once you have your company number from the Companies Registration Office you can register your new business for tax. This is an absolutely critical step that can be undertaken either by the founder of the business or their tax agent.
There are tax advantages to limited company status, most notably that differentiating between dividend and salary for tax purposes means the company owner saves on paying social security payments on dividends and lowers them on salary, reducing their overall tax bill.
The extent to which the business uses the services of a professional accountant or tax adviser is down to the entrepreneur. It might be tempting to assume that in the era of ‘making tax digital’ there is no need to work with an accountant on a regular basis, but by making sure the business claims all the relevant allowances and credits an accountant can significantly reduce the amount of tax the business pays.
Keep it local
Even companies with aspirations of international success will benefit from dealing with service providers close to home. There are obvious practical reasons for this (such as logistics) but using services from other Irish companies also means dealing with people who understand the market the business is operating in.
Using an accounting system that has been developed specifically in response to the needs of Irish companies and is supported in Ireland by local staff with detailed knowledge of our tax regime means working with a partner that understands the environment the business is operating in and can come up with appropriate solutions.
It also makes sense to use a cloud-based accounting solution such as Big Red Cloud. With working from home set to be the norm for some time to come, businesses need to be able to access their accounts at any time from any location.