McNamee, Bourke & Co.

Tel/Fax: (094) 9024402 Mobile: (086) 8392753 Email: info@mcnameebourke.com

Business Startups We discuss the legal structure of any new business with the client and suggest the best form of structure. Sole Trader A sole trader/partnership structure has the following main advantages: • Confidentiality is maintained since the public has no access to accounts • PAYE and PRSI contributions do not need to be paid when proprietors or partners draw cash • Losses from the business can be set off against other income • It is relatively easy to transfer the business to a limited company at a later stage - This is subject to capital gains tax and stamp duty issues A sole trader/partnership has the following main disadvantages: • Possibly higher tax liabilities • The owner is personally responsible for all the liabilities of the business (i.e unlimited liability); with a partnership, partners are liable for debts on a joint severance basis which means that if one partner fails to meet his share of partnership debts, creditors can look to other partners for settlement • Less flexibility in transferring ownership (for example, to other members of the family) Limited Company A limited company has the following main advantages: • Liabilities of the company are the responsibility of the company - the shareholders are liable to lose only the share capital they subscribe • Income tax is paid only on salaries drawn and benefits in kind and generally personal higher rate tax can be avoided if profits are retained in the business • Greater pension benefits can be secured • The corporation tax rate is significantly lower than income tax rates • It pays its corporation tax liability primarily after the income had been earned whereas a sole trader pays it during the period of income was earned • Easier to spread ownership of the company A limited company has the following main disadvantages: • In accordance with the companies acts, financial and certain other information has to be filed on public record • Compliance with the considerable legislation contained in the Companies Acts affecting limited companies can be time consuming and costly • Lenders and key suppliers often seek personal guarantees from directors which tends to reduce significantly the value of limited liability • Additional tax is payable when accumulated profits are withdrawn from the company as dividends, extra renumeration, benefits in kind or loans • Investment income will be subject to a corporation tax surcharge of 20 % unless it is distributed by way of a dividend. This may also apply to trading income of companies carrying on professional activities

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