- What Is A Limited Company?
Most contractors follow the route of forming a Limited Company on commencement of their career as a contractor.
A limited company must prepare annual accounts and have them audited. A summary of these audited accounts must be lodged with the Companies Registration Office. From a pension point of view the company can contribute - without restriction to a pension for a director - and can obtain a deduction from profits for this amount.
The director is not liable to account for any income tax on these payments made on his behalf. If a director has his own motor vehicle he can claim a mileage allowance for any business miles he travels on behalf of the company.
The mileage rate depends on the car and on the annual business miles travelled. The company can obtain a deduction from its profits for these payments and the director is not taxed on them. However, where mileage is claimed the director must pay his own car insurance, motor tax and petrol costs.
A company can have any year-end it chooses and no commencement or cessation provisions apply. As a company is a separate entity from its directors, no director can be held personally liable for the debts of the company, unless a personal guarantee is given in any case.
How to set up as a Limited Company
The most common ways of setting up a limited company are through a company registration agency or through an accountant or solicitor.
The contractor may choose a company name and specify the objects of the company. The process takes about two weeks. It must have at least two Directors and shareholders and the cost of setting up the company is approximately €400.
It is recommended that the contractor open two bank accounts in the name of the company: A current account for the day-to-day transactions of the company. A deposit or high-interest account which should be used to save funds for payment of VAT and tax bills.
For more advice please contact Enterprise People on +353 (0) 1 628 7800.