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Setting up a business in Ireland

Setting up a business in Ireland. Nationals of the European Economic Area (EEA) or Switzerland do not need permission to set up a business in Ireland. UK nationals are also allowed to work in the Republic even after December 31st  2020 when Brexit is due to come into effect.

Nationals from a non-EU/EEA and non-Swiss nationals need to apply for permission under the Immigrant Investor Programme (IIP) or the Start-up Entrepreneur Programme (STEP).

Applicants for the IIP must be high net worth individuals with a personal wealth of at least €2 million. Applications are determined by an Evaluation Committee, composed of senior civil and public servants from relevant Irish Government Departments and Agencies.

The STEP is designed for business introducing a new or innovative product or service to international markets, involved in manufacturing or internationally traded services, capable of creating 10 jobs in Ireland, led by an experienced management team, having their headquarters in the Republic and less than 5 years old.

In order to set up a business it´s necessary to decide if is going to operate as a sole trader, as a partnership or as a limited company. The type of structure depends on the kind of business and the attitude to risk.

Sole Trader

It is an individual who owns and manages a business. It is responsible with his own assets (personal and professional) for the obligations due to the trade. The sole trader has to register as a self-employed person with Revenue and in case of using a business name it is necessary to register the business name with the Companies Registration Office (CRO).

Partnership

A partnership is where a minimum of two persons conduct business with a view to making a profit. It must consist of at least two persons and there is normally a maximum of 20.

 A partnership can be made up of natural persons and bodies corporate. It is not a separate legal entity – that is to say, a partnership has no legal personality, separate and distinct from the various partners which comprise the partnership. A partnership that adopts a name that does not consist of true names of the partners without any addition must register the name as a Business Name in the Companies Registration Office –CRO.

There are also limited partnerships consisting of at least one general partner and one limited partner. The general partner(s) is/are liable for all the debts and obligations of the firm. The limited partners contribute a stated amount of capital and are not liable for the debts of the partnership beyond the amount contributed. A limited partnership must be registered with the CRO and in accordance with the 1907 Act; otherwise the partnership is a general partnership.

Companies

Limited Company

In a Limited Company the shares are owned by its shareholders and the liability is limited to the amount, if any, remaining unpaid on the shares held by them. A company is a separate legal entity and, therefore, is separate and distinct from those who run it. All companies have to register at the Companies Registration Office –CRO.

Private Company Limited by Shares (LTD Company)

The members’ liability is limited to the amount, if any, unpaid on the shares they hold. The company may have between 1 to 149 shareholders (members) and is not legally required to hold an Annual General Meeting. An LTD company can have only one director if it chooses and does not have stated objects therefore can undertake any activity.

Designated Activity Company (DAC)

This limited company type is applicable to those companies who wish to outline and define a specific type of business in their Constitution. DAC‘s retain Memorandum & Articles of Association as part of an overall Constitution document. A Designated Activity Company could be a private company limited by shares (Part 16 Companies Act 2014) or a private company limited by guarantee. These companies are most often formed by non-profit organisations. In any case, DAC companies have to add to their name the phrase ‘Designated Activity Company’ or ‘Cuideachta Gníomhnaíochta Ainmnithe’.

Public Limited Companies (PLC) 

A Public Limited Company in Ireland is used normally in situations when the intention is to seek a listing on the Stock Exchange or where a business expansion is being formulated. There is no restriction on the number of shareholders. When setting up a PLC in Ireland, it must have a minimum of two directors and cannot dispense with the holding of an AGM. The name of the PLC must end with the suffix ‘Public Limited Company’ or ‘Cuideachta Phoiblí Theoranta’.

Unlimited Companies 

Unlimited companies are not very common in Ireland. Their main distinguishing feature is that members do not have limited liability. There are three types of unlimited company types in Ireland:

ULC – A private unlimited company with a share capital

PULC- A public unlimited company without a share capital

PUC- A public unlimited company with a share capital

According to the Companies Act 2014 it is also possible to create Investment Companies or it can be also a Societas Europaea which are a form of Public Limited Company registered under separate legislation. A Societas Europaea or SE is a European public limited company formed under EU Regulation (Council Regulation 2157/2001) and Statutory Instrument 21 of 2007. 

Taxing Aspects

Companies resident in Ireland must pay Corporation Tax (CT) on their worldwide profits. These profits include both income and capital gains. Non-resident companies that trade through a branch or agency in Ireland must also pay CT. There are two rates of CT:

  • 12.5% for trading income
  • 25% for income from an excepted trade (as defined in part 2 of the Taxes Consolidation Act)
  • 25% for non trading income, for example rental and investment income.

CT is charged on the profits in a company’s accounting period. This period cannot be longer than 12 months. If the tax rate changes in the accounting period, profits will be apportioned on a time basis and taxed accordingly. New companies or start-ups may get a tax relief on the first 3 years of CT.

For the self-employed the main legal obligation is to register as a self-employed person with Revenue. Then it will be to pay tax on the profits from the business and on any other income that they have.

Accountancy Aspects

Companies are required to keep proper books of account and will need to disclose details of their financial statements at the Annual General Meeting (AGM) and to attach a copy of those financial statements to the annual return filed with the CRO. In addition, they are required to observe certain standards in the preparation of financial statements, following specimen formats and disclosing certain information by way of notes to the financial statements.

Irish legislation requires that all companies prepare their audited financial statements according to the International Financial Reporting Standards –IFRS. The dormant companies, companies limited by guarantee, unlimited companies and some others due to size may avail of an audit exemption.

By Mónica Navarro, Ireland senior counsel, Colombian abogada at Del Canto Chambers

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