Open for Business: Juicing up a company in Ireland, circa 2016

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Two major things changed in 2015 in Ireland. One was the redefinition of marriage, the other the modernisation of company law. We think both are brilliant reasons to come to this beautiful island. We have outlined the steps for establishing a business in Ireland in this post. We will leave the marriage one for another time.

As John O’Farrell put it brilliantly when he spoke to Tom Lyons last March, foreign startups look to set up an office in Ireland because of the combination of talent, time zone, business climate, language, and culture. If a partner at Andreessen Horowitz thinks this way, it’s probably worth spending the next few minutes to see just how easy it is to set up your business here in Ireland. (Or alternatively look at this handy infographic we have prepared for you)

Thanks to Beauchamps Solicitors for advising on the content of the article.

Types of businesses
Before you head off to the Companies Registration Office (CRO) page (yes, everything happens online), you need to figure out the best legal structure for your company. In Ireland we have three:

Sole trader
If you are a writer, designer or crafter of any kind, this is your best bet. The registration is simple, and you do not pay corporate tax. You do pay Income Tax, PRSI, and USC, as well as VAT if you go above the threshold. If your business fails, your personal assets can be used to pay your creditors.

Partnership
If you want to work with one or more people in a partnership but are not ready to tie the knot as a company, this is an excellent option. The partnership agreement should be drawn up by a solicitor and the partners are jointly responsible for running the business. If it fails, all partners are jointly responsible for the debt.

Company
If having customers, juggling shares, raising funds, hiring employees, reserving patents, and, being in the news is your thing, this is the entity for you. All companies are not created equal though. They can be limited and unlimited but for the sake of this article, we will focus on limited companies.

The main thing that defines a limited company is the limited responsibility that owners have in terms of debt. The creditors have a claim on the assets of the company but not on the assets of the individuals behind the company.

Within limited companies, there are several distinctions but to keep things simple let’s just focus on the two most relevant ones:

  •       Limited by shares – Requires at least one director and one secretary. It does not have an objects clause to begin with, so you can add this later and pivot easily. Simple Constitution, no Annual General Meetings and a maximum of 149 members round it up. Since this simplified type of company was introduced last year, most new companies in Ireland have opted for it.
  •        Designated Activities Company (DAC) – Requires two directors, an object clause explaining the focus of the business and a Constitution comprising a Memorandum of Association and Articles of Association. This company type also holds an Annual General Meeting. If your business intends to lend money or provide other financial services, you may be required to operate under a DAC, so consult a solicitor to explore further.

For other company types look here. Whichever type you choose, you have to file an Annual Return every year.

 A few extra notes
A Director cannot be:

  •     under the age of eighteen
  •     a body corporate
  •     an undischarged bankrupt
  •     a director of more than 25 companies unless those other companies are exempted
  •     someone previously disqualified by the High Court for a certain period

If the company does not have a director who is resident in the European Economic Area, it must put a bond in place. Typically, this costs in the region of €2,300.

Who can be a Company Secretary?
In theory, anyone but the person must be equipped (either personally or by engaging external advisors) to ensure that the company is complying with all legislation and all internal regulations of the company.

What about the name?
Sole traders, partnerships and body corporates need to register the business name under which they will operate if it differs from their own. Registration costs €40, €20 if you apply online. You will get your certificate within 2 weeks with which you will then register to pay taxes.

Companies do not have to register their name separately. The form for incorporation serves that purpose. You can look through the CRO system to make sure the name is available. If it is, you can reserve it while you are preparing all other documents. The reservation is valid for 28 days. The piece of mind that no one will take your name will cost you €25.

And as far as the nitty gritty details of the name go?

  •    A company being incorporated as a Private company limited by shares must end its name with “Limited” or “Teoranta” which is the Gaelic translation.
  •    A company being incorporated as a Designated Activity Company, either limited by shares or guarantee must end its name with either “Designated Activity Company” or the translation “Cuideachta Ghniìomhaiìochta Ainmnithe” unless exempted.
  • After incorporation, abbreviations such as Ltd or DAC can be used.

So that’s all covered. Now onto actually registering that company of yours!

How to register
The short story is to use a solicitor or engage a company formations expert who can help with the setup, act as secretary, and provide a registered office. All of this can be done for a pretty reasonable price.

The slightly longer story:

  •    Register an office anywhere in Ireland. The address must be a physical location, not just a post office box number. FYI people have the right to visit the company’s registered office to inspect certain registers and documents and to deliver documents by hand.
  •    Write up a Constitution, which sets out the conditions upon which the company is granted incorporation. It must contain provisions dealing with certain matters e.g. the name of the company and its liability. You can find various templates for different types of constitutions here.
  •   Fill out Form A1, which requires details of the company name, its registered office, details of secretary and directors (including confirmation that at least one director is resident in the EEA), their consent to acting as such, the shareholders and details of their shares. You will be asked to confirm that the company will carry on a business in Ireland and to classify the principal activity of the company using the NACE classification for economic activities. Submit it online using CORE. You will get your Certificate of Incorporation within a few days.

Congratulations you have a company!! Before we go though, here are a couple of extra helpful insights.

Taxes
Sole traders and partnerships need to fill out TR1, do a Self-Assessment and pay their taxes by October 31st of the next year.

Companies fill out TR2, which is used for corporate tax, PRSI/PAYE, and VAT. Corporate tax needs to be registered within 28 days of incorporation. The same is true for payroll taxes if the director will be paying himself/herself a salary. Register for VAT if your revenue is expected to go over €37,500 for services, and €75,000 for goods.

Taxes can be paid online, which requires registration with ROS. It requires several steps but do not despair; it is totally worth it.

Bank accounts
All of the major banks in Ireland are very startup friendly and have good options for opening accounts. While their requirements vary slightly, the documents you must always have are:

  •    Constitution/ Memorandum and Articles of Association
  •    Copy of the original Certificate of Incorporation or Certificate of business registration for a sole trader or partnership
  •    Tax number
  •    In the case of a company, a copy of the board resolution allowing the company to open a business bank account.
  •    They will also require proof of identity and address for each director and shareholder or partner as the case may be.

Ongoing Requirements
An Irish company has ongoing obligations to maintain registers, make filings with the CRO, and to ensure its correct details are on its stationery, invoices, website and other. Seek advice to ensure you are complying fully.

Beyond
If you want to find out more, Frontline Ventures have a wonderful guide for startups and CRO have a useful guide for post-incorporation activities. In addition, there are over 80 government agencies in Ireland who encourage and support entrepreneurship. A great place to find out more about them is going through the online guide Supporting SME’s, which lists those relevant to you and your company.

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