Posts Tagged ‘Company Formation’
Two of the most frequently asked questions for people looking at a startup scenario are:
1) How do I setup a company, and
2) What type of company should I set up
How do I set up a company?
The Companies Registration Office (CRO www.cro.ie) is the government body responsible for registering all Irish businesses. The offices are on Parnell square in Dublin opposite the entrance to the garden of rememberance. The staff are generally quite helpful and will be able to point you to any forms that you will require. The CRO have a very good website and most things can be now done through their online filing system.
An easier alternative is to use the services of one of the many formation companies that will register the company on your behalf. They will provide you with a company seal (required for many legal docuements such as leases etc.), articles and memorandum of association etc.
Note: Do not be tempted to rush through this stage in your enthusiasm to get started!! The name of the company, list of Directors and Shareholding structure of the comapny, naming of Chairperson, secretary etc are extremely big decisions and should not be taken lightly. For example if down the road you fall out with your partners these details will be deciding factors in who has the upper hand legally!
A formation company will charge about €300 to register the company on your behalf. I have used www.formations.ie and found them to be very professional.
What type of company should I set up?
For most people the choice is either Sole Trader Or Limited liability company. Your accountant should advise you on the best structure for you. Generally speaking sole trader suits an individual running a business primarily on their own i.e A window Cleaning service, Painter etc. It can be a good idea to start the company as a sole trader and then move on to Limited liability if the business grows and more people become involved. The paperwork requirements for a sole trader are significantly less than for limited liability companies.
The idea behind a limited liability company is that an entity (the company) is seperate from the directors and shareholders. For example if a company does not pay its bills the company is sued not the directors. In reality, particularily in the current climate, most suppliers will look for personal guarantees from directors of the company before they will supply. This negates the protection of the limited liability. If a number of people are involved and if the company turnover is likely to be significant than forming a Limited company is recommended. It is important to be aware however that the filing and returns required by the CRO for limited companies are taken very seriously. If you are late with annual returns, significant fines will build up, also companies are entitled to an audit exemption for the first few years. If you do not file your returns on time you will lose this exemption. Furthermore shutting down a limited company is quite difficult and costly (you need to put an advertisement in the paper etc!!). Many people ignore the boring responsibilities of setting up a company in their initial enthusiasm, unless you are aware of your obligations you will find yourself and fellow directors spending lots of money on accounting audits and fines. If you put your head in the sand and ignore your CRO obligations , the company may be handed over to the Office of Corporate affairs who have the power to prosecute companies who breach the regulations. Don’t say I didn’t warn you !!!