THERE’S NEVER BEEN a better time to start a new business in Ireland, with a growing number of programmes for startups and government supports for entrepreneurs.
Most of our clients come to us as early stage startups, so we have compiled a list of the steps that are essential to think about when planning to launch your business.
Assuming you personally feel ready to take the leap, I’ll take you through the key startup steps; from registering your startup to deciding what legal structure will best suit your business.
1. Choose a legal structure
Before you can issue invoices and charge customers for services, you need to decide on the business structure you will operate as. The most common choices are either to be a sole trader or a limited company.
To make the sole trader vs limited company decision easier for you, here are some of the key points of difference, and the advantages and disadvantages:
Sole trader: One of the advantages of becoming a sole trader is that it’s the simplest way of setting up a business. You can use your own name, or register a business name.
As a sole trader, you don’t need to file annual returns with the Companies Registration Office (CRO), although you do still need to keep proper books and records, file taxes to Revenue and pay VAT if applicable.
However, there are some disadvantages. As a sole trader, you are personally liable for all debts, meaning your personal assets are at risk if there is a claim against the business.
If you choose to be a sole trader, tax is also applicable at personal tax rates, which can be up to 55%.
Limited company: The main benefit of a limited company is getting a corporate tax rate of 12.5% on profits, which compares very favourably to personal tax rates of up to 55% for sole traders – although you still need to pay personal taxes on any salary you draw down from the company.
You also have the advantage of more credibility as a business. For example, limited companies setting up in Ireland benefit from more startup supports.
In contrast to a sole trader, a limited company has lower liability on claims against your business. The personal assets of directors or shareholders generally cannot be seized to pay off company debts.
It’s important to note that setting up as a limited company has more steps involved. Also, being a limited company involves more ongoing statutory requirements in order to keep your business compliant.
If you decide to be a sole trader, you need to register with the Revenue Commissioners for tax and PRSI purposes as soon as you’ve decided to start working for yourself, because it will affect your tax situation.
If you decide to become a limited company, you need to register with the CRO first. Then, once your business is incorporated – a process that usually takes 4-5 days - you can register with Revenue for tax. You will also need a bank account in the name of the limited company.
Anyone can set up in business as a self-employed sole trader, although for certain types of work you may need a licence or permission from your local authority or county council.
3. Choose your branding
As accountants, we can’t help you with the pretty colours, but we know how important your business name is and how to register this new identity.
If you decide to become a limited company, you will have to choose a company name – and it’s important to think about your persona online when doing so.
The company name must be on display outside every place where business is in operation, and it will have to be unique if registered with the CRO.
Every startup wants a distinctive name, something that is memorable and will withstand time. Some of our clients use an online name generator to help come up with ideas; for instance, Naming.net and Biznamewiz are sites that can help you choose potential company names.
The next step is to secure the domain name for your business. You can choose .ie for Irish businesses or .com, depending on your preference. Check if a competitor has already taken your name by using the Irish Domain Registry.
Many of our clients also start off by creating simple ‘minimum viable product’-type websites using cheap services like Wix, Squarespace and Wordpress.
4. Find funding
There are a number of funding and investment options available — from government to private programmes. Take some time to research and decide what is most suitable for your startup.
For example, Local Enterprise Offices provide support to local businesses that are starting up or developing throughout the country.
If you are a limited company, take a look at the New Frontiers entrepreneur development programme. The successful candidates can receive up to €15,000 and support includes training in areas such as business planning and marketing.
5. Cash planning and forecasting
Start your accounting off on the right foot and set up a simple financial system for your business. Here’s a few tips:
Cash-flow projections/monitoring: Know your bank balance — what is due in? When is it due, and what will you have to pay out every week/month?
Have a bookkeeping system: Even for early-stage startups, having a bookkeeping system in place is a necessity. Something as simple as a spreadsheet showing the income and expenditure on a weekly/monthly basis is sufficient.
If you feel you can’t manage this, then outsource it. Functions which can be outsourced include payroll, bookkeeping and VAT returns. A bookkeeper will probably do the job in less than half the time than you can, allowing you to focus on other aspects of your business.
Online accounts systems: Doing your accounts online can save you time and money. Using online financial and accounting systems means you can have access to your records at any time, wherever you are.
There are a number of accounting programmes available. Our top three are: Xero, Kashflow and AccountsIQ.
Be smart — save: Your startup is taking off, and you’ve made some cash — just remember to keep within your budget.
Think about setting up a savings account or a separate deposit account with your bank so that you have at least enough to pay your taxes when they fall due.
6. Getting paid
A major challenge for a startup is trying to balance your cashflow. Often clients don’t pay on time, leaving you in a difficult financial position.
To try to get paid on time you should be consistently following up on any outstanding invoices. We recommend following up on the outstanding balance around one week after the due date stated on the initial invoice.
Firstly, email or phone the client to ensure the invoice has been received correctly and there was no issues regarding price or product supplied. Secondly, send a reminder if no funds have been received after seven days.
If it gets to 14 days after the reminder has been sent and no payment has been received, you should make a follow-up call. Be clear about how lenient you will be and what your future steps are. Keep any paperwork or promises the client has made on record.
If you still have an account unpaid after it’s 30 days overdue, perhaps it’s time to cut that business relationship.
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