What new companies can expect in their first six months
The first six months can be a steep learning curve, especially if you don’t know what to expect. There are registrations and deadlines due during this time that could get you on the wrong foot if you miss them.
In this guide, you will learn what you need to do to ensure that your new company is compliant during its first six months in business.
If you need help, don’t have the time or resources to look after your compliance, or if you need professional advice on your business journey, we are here to support you.
1) Ensure correct company set-up
The first thing is to ensure your new company is set up correctly. It is not enough to register a business name. You need to go through the formal process of completing Form A1, having a company constitution, and submitting the relevant documents to the Companies Registration Office (CRO).
Once your company is registered, you should have received a Certificate Of Incorporation and a company number. You need this information to continue to the next steps.
2) Register of Beneficial Owners
New companies have five months to register their ultimate beneficial owner with the Central Register of Beneficial Ownership (RBO). Beneficial ownership refers to the natural person(s) who ultimately owns or controls more than 25% of a company’s shares/voting rights/ownership interest.
Note that although new companies have five months to complete this registration, many banks in Ireland won’t open any new accounts until this registration is done. So, we recommend that new businesses complete this step as soon as possible.
Registering the ultimate beneficial owner is done online, through the RBO website, and this person needs to have a Personal Public Service Number (PPSN), or they’ll need to complete a BEN2 form and upload it to the RBO website.
This registration is legally required, and failure to register correctly is a criminal offence and can result in a fine or even conviction.
3) Set up a bank account
Once your RBO is registered, you can set up a business bank account in Ireland.
There are many banks to choose from, and we advise talking to the different banks directly. They may have different rates and perks for new Startups, so starting a relationship with them early is best.
Some banks offer remote set-up, meaning you can do the whole process online and don’t need to visit a local branch. This is an excellent time-saver, and hopefully, it’ll help you set up your bank account faster.
4) Corporation Tax registration
While waiting to get your bank account set up, tax registration should be at the top of your mind.
The first tax that you should be aware of is Corporation Tax. It applies to all Limited Companies in Ireland, not just large corporations (as the name might suggest).
Companies register for Corporation Tax through Revenue’s Online System (ROS), and it’s done before the company starts trading or invoicing clients.
There are two central rates of Corporation Tax in Ireland: 12.5% and 25%, and the rate you pay depends on where your company is centrally controlled and managed. Most businesses incorporated in Ireland will fall into the first tax rate – 12.5%.
If you are wondering what rate of Corporation Tax you should pay, consider where the directors are residents and where the company is carrying out its trade. The answer to these questions will usually tell you where the company decisions are made and where the business is “centrally managed and controlled.”
You can ask an accountant about your situation. They will ask you a few questions to establish what tax rate you should pay and explain whether you qualify for 12.5% Corporation Tax.
What happens if you forget or don’t register for Corporation Tax?
If you set up a company and don’t register for tax, Revenue will ask you to complete a Company Statement of Particulars within 30 days of receipt of the request. This statement details the nature of the company.
New companies that don’t register for tax or complete the Statement of Particulars are notified to the Registrar of Companies (CRO). The CRO may begin the strike-off process under the Companies Act 2014. The company directors and company secretary may also be liable to a separate penalty under the Taxes Consolidation Act 1997.
However, don’t fear Revenue or the CRO, as they can usually offer great advice to new companies if you communicate early with them. But this situation is avoidable if you know what to do in your first six months.
5) VAT registration
Many companies want to register for VAT from the outset, and it can be tricky if you don’t know what Revenue is looking for.
It’s also a long process that can take up valuable time in new companies. It can take up to 28 working days to get a VAT number in Ireland, and in the meantime, Revenue may ask you to provide evidence you need a VAT number before they process your application.
6) Set up payroll
Depending on the stage you are at with your new business, you may need to decide if you will pay yourself a salary or hire any staff.
If you are a director, you can pay yourself a salary from the company.
To do so, the company must register for Employer’s Taxes and operate a payroll system. You can outsource your payroll requirements to a professional firm or do it yourself. But be aware that there is strict legislation around payroll, and it may be a good idea to offload this work to the experts so you can focus on running your business.
7) Bookkeeping - keep organised records of receipts and invoices
Your bank account should be set up at this stage, and you’ve likely spent some money getting your business set up.
Did you know you can claim pre-trading expenses when calculating your tax bill? For example, if you purchased a new laptop to start your company on the right foot, you may be able to claim this as a tax-deductible expense.
But remember here that you must keep organised records of all these transactions and ensure that you have evidence to prove that they were “wholly and exclusively for the business”.
8) Annual Returns
All companies incorporated in Ireland have an Annual Return Deadline (ARD) as soon as they are set up.
Annual Returns are monitored by the CRO and completed through a Form B1. The first Annual Return gives the CRO information about the company, such as the stakeholder and share capital situation.
- A company’s first Annual Return is due six months after incorporation.
- Annual Returns are filed online through CORE.ie.
- A company has 56 days after its ARD to file its Annual Return online.
This can be a long process, with penalties if done incorrectly or if you miss your Annual Return.
Where to start?
The compliance requirements for new companies can be complicated and cause stress for new business owners. Our advice is to start by recognising what you can do and what you can outsource.
If cash is tight, consider joining a free webinar or start by outsourcing the big tasks, like your Annual Return, because missing your Annual Return can have serious consequences for your business.
We offer a full range of services to help you succeed in business. We’re always happy to help you decide what services best suit your needs.
Tom is a Fellow Chartered Certified Accountant (FCCA) and Chartered Tax Advisor (CTA) and is Accounting Team Manager at Accountant Online. Areas of expertise include Accounting, Compliance, Taxation relating to small business and company directors.