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IT Contractor - Ltd Company or Sole trader?

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  • 01-06-2007 12:33pm
    #1
    mik_da_man
    Hosted Moderators Posts: 9,945 ✭✭✭


    Hi,

    I am currently thinking of working as an IT Contractor.
    And I am looking for a bit of advice.
    Should I register as a sole trader or Ltd Company?
    And what is involved in both?
    Any help / links are appreciated

    Mik

    Edit: Just found This which answers a few Q's
    But if anyone has done this please let me know


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    #2
    pwd
    Closed Accounts Posts: 5,284 ✭✭✭pwd


    I've worked as a sole trader and it was grand. I was a bit daunted by having to fill in tax returns but the online forms are very straightforward and staff in the revenue offices always seem helpful.
    As far as I know the main reason for forming a ltd company is so that you personally cannot get sued - only the company can. There are other things - if you work as a sole trader you can only call yourself by your name - although I think a lot of people ignore this - whereas you can call your company anything (within reason).


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    #3
    information
    Closed Accounts Posts: 362 ✭✭information


    pwd wrote:
    if you work as a sole trader you can only call yourself by your name

    you can register any business name and trade under that as a sole trader, nothing to do with a ltd company.

    a lot of companies will only deal with ltd companies, as it removes any doubt that the contractor actually is an employee of the company

    edit: lots of threads on this subject in this forum


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    #4
    --amadeus--
    Closed Accounts Posts: 5,096 ✭✭✭--amadeus--


    The best advice is to talk to an accountant. It'll cost you in the short term but profit you in the long term. Also talk to your local enterprise board. They won't give you any money but they will point you towrads lots of good info and cheap training.

    There are a number oif advantages and disadvantages to both.

    Sole trader - you are personally liable for all debt incurred by the company. Don'y shrug this off - a member of my wifes family lost thier home over personally guaranteed business debt. However all personal expenses can be written off against tax and - if you are married - your partner may be able to claim a tax rebate based on any buisiness losses (talk to an accountant or tax office on this). All business earnings though are taxed at personal rates of tax (up to 42%)

    Ltd Company - protection from creditors (apart from teh bank who will make you sign a personal guarantee). Lots more paperwork and you will probably need an accountant to keep it all straight. Can't get personal tax rebate based on company losses. However all company earnings are taxed at a basic rate of 10% (I think). A small point but as an "employee" of a limited company you may find it easer to get personal credit than as a sole trader.

    Total off the wall point but there are a number of offshore companies who specialise in acting as umbrellas for self employed IT staff. They invoice your clients on your behalf and so all of your earnings stay offshore under a more benevolent tax regime. I haven't done it but I know people who have...


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    #5
    mik_da_man
    Hosted Moderators Posts: 9,945 ✭✭✭mik_da_man


    --amadeus-- wrote:

    Total off the wall point but there are a number of offshore companies who specialise in acting as umbrellas for self employed IT staff. They invoice your clients on your behalf and so all of your earnings stay offshore under a more benevolent tax regime. I haven't done it but I know people who have...

    Cheers for your info,

    And about the above point, I have heard of this but not too sure how to set it up for myself and any risks involved.
    Any ideas about this?

    Thanks

    Mik


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    #6
    stoneroses
    Closed Accounts Posts: 56 ✭✭stoneroses


    I did IT contracting in Ireland for 9 years through a limited company here.
    It is the most efficient mechanism in terms of structure / Taxation and Expenses. Most importantly most companies today will only hire contractors/consultants if they are setup as a limited company -- offshore arrangement for contractors are currently attracting the attention of the revenue and most companies are insisting on Irish registered LTD companies.


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    #7
    mik_da_man
    Hosted Moderators Posts: 9,945 ✭✭✭mik_da_man


    So you set yourself up as a limited company?
    Any risks / issues that I should be aware of?
    I have a good accountant on the job (used to work for him!) but personal expierence would be a help too

    Cheers

    Mik


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    #8
    Static M.e.
    Registered Users Posts: 3,088 ✭✭✭Static M.e.


    OP.

    In the same boat as yourself I've started using a Company called CXC might be worth giving them a call.

    http://www.cxcglobal.ie/


    Ive only just started using them in the last two months so I can't comment on them yet but so far im happy.


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    #9
    digidy21
    Closed Accounts Posts: 10 ✭digidy21


    go limited company all the way. forget about sole trader. you may as well be trading as mickey mouse. limited company will allow you you to build up credit terms with suppliers and will get other companies to take you more seriously. also if you ever have the misfortune of getting sued over work then it wont be you that gets sued personally, it will be your limited company. also if you go bankrupt it wont be you personally that suffers. also these days a lot of suppliers dont take soles traders seriously when it somes to credit terms and what ever you may think now, you will neeed credit at some stage.

    just my thoughts.

    cheers
    digidy21


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    #10
    SouperComputer
    Registered Users Posts: 6,949 ✭✭✭SouperComputer


    I operated as an independant contractor and as a sole trader for three years without any difficulties getting credit from suppliers or doing business with top companies.

    Limted means you will have more admin overhead and more accounting cost. The advantages insofar as liability for LTD companies is grossly misunderstood. If you mess up and are found liable, you can be sued, LTD or not makes no difference. You can write off more expenses though, so this is a plus.
    digidy21 wrote:
    if you ever have the misfortune of getting sued over work then it wont be you that gets sued personally,

    Like I said above, and I think it bears repeating, this is not true. If you are found liable then they can sue you, limited or not.

    My 2c, good insurance is more important at the start than setting up with "limited liability"


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    #11
    misterq
    Closed Accounts Posts: 382 ✭✭misterq


    most companies require IT contractors to be limited companies rather than sole traders these days.

    Despite my telling them this, a friend of mine went off and registered for VAT etc as a sole trader and found out the hard way when she handed in her invoice at the end of the first month!


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    #12
    Sully
    Moderators, Education Moderators, Technology & Internet Moderators, Regional South East Moderators Posts: 24,056 Mod ✭✭✭✭Sully


    Cant you just go about advertising your services, without registering as a business (besides business name)? I assume it depends on what type of IT your working in tho. Also, I take it registering as a business (LTD, Sole Trader etc) just "protects" you and gives you benefits from tax etc?


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    #13
    digidy21
    Closed Accounts Posts: 10 ✭digidy21


    i understand what you are saying SouperComputer re you still get sued perosnally. but if you are a sole trader and you end up in court and the court rules against you then it is you personally that has to pay up i.e. you have to pay the money if it means selling your own home, car, perosnal posessions etc.

    as a limited company you are still resposible but it is the limited company that gets sued so if there isnt enogh funds in the limited company account then you can just file for bankrupcy and the court CANT go after your own perosnal possesions. it is up to the liquidators to get the money and they cant touch anything that isnt owned by the limited company i.e. your own home, own car, etc

    and there are no more accounting costs involved in limited company. you may pay an extra €100 for registration but after that it is about the same costs.

    i have to agree with your point about tax right offs though. i think that you can write off a lot more stuff as a limited company. dont quote me on that though.

    hope this helps

    cheers

    digidy21


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    #14
    mik_da_man
    Hosted Moderators Posts: 9,945 ✭✭✭mik_da_man


    Static M.e. wrote:
    OP.

    In the same boat as yourself I've started using a Company called CXC might be worth giving them a call.

    http://www.cxcglobal.ie/


    Ive only just started using them in the last two months so I can't comment on them yet but so far im happy.

    Cheers that's what I was lookin for :D
    Still debating between this and a Ltd Company.
    Seems like the sole trader idea is out the window as the Co I will be workin for require a Ltd Company.

    Mik


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    #15
    PRman
    Registered Users Posts: 269 ✭✭PRman


    A ltd company is the way to go but I wouldn't trust that umbrella company scheme - it's seems a bit dodgy with total strangers all directors of a limited company. Does the memorandum & articles limit their powers or anything like that? I'd recommend setting up you own ltd. company just make sure you file returns, etc. on time and you'll be fine. Try a formation agent such as www.companyformations.ie or go tru your accountant. Good luck with it..


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    #16
    information
    Closed Accounts Posts: 362 ✭✭information


    PRman wrote:
    A ltd company is the way to go but I wouldn't trust that umbrella company scheme - it's seems a bit dodgy with total strangers all directors of a limited company. Does the memorandum & articles limit their powers or anything like that? I'd recommend setting up you own ltd. company just make sure you file returns, etc. on time and you'll be fine. Try a formation agent such as www.companyformations.ie or go tru your accountant. Good luck with it..
    Two posts in a row recommending that company, are you sure its not your company ?


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    #17
    PRman
    Registered Users Posts: 269 ✭✭PRman


    that's very sceptical of you - I just happened to reply to a couple of posts just as you did... shame you don't have anything positive to contribute...


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    #18
    information
    Closed Accounts Posts: 362 ✭✭information


    PRman wrote:
    that's very sceptical of you - I just happened to reply to a couple of posts just as you did

    Just what I wanted to hear

    http://www.boards.ie/vbulletin/showthread.php?t=2055116642
    PRman wrote:
    We are also looking to recruit an administrator. PM me 4 more info...
    PRman wrote:
    Job is posted here

    http://www.gumtree.ie/cgi-bin/show_p...ng_id=11248460

    Guess what company the job is for ?


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    #19
    PRman
    Registered Users Posts: 269 ✭✭PRman


    That was an admin job for the PR company which we've filled so I don't really know what ur on about 'information' - try conspiracy theories u goon

    Anyway Mik your better off with a Ltd. company - a friend of mine is a contractor and he rights off a load of expenses against his business so it's the most tax efficient. Up to u whether u go umbrella or not though u could probably get all ur accounts done for 2k p.a. if you had ur own ltd. company. even better if u know an accountant who'll do it as a nixer..


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    #20
    information
    Closed Accounts Posts: 362 ✭✭information


    PRman wrote:
    That was an admin job for the PR company which we've filled so I don't really know what ur on about 'information' - try conspiracy theories u goon

    http://www.boards.ie/vbulletin/showthread.php?t=2055116642

    You stated that it was your company and
    linked to the job which was for ww.companyformations.ie
    the company that you deny a relationship with

    You remove the job from gumtree and now you are lying.

    If you want to be childish, I'll be childish I'm reporting you for
    breach of the rules, we'll let the mods decide.


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    #21
    PRman
    Registered Users Posts: 269 ✭✭PRman


    ha ha!! get a life mate! nobody is interested...


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    #22
    information
    Closed Accounts Posts: 362 ✭✭information


    PRman wrote:
    ha ha!! get a life mate! nobody is interested...

    You have to resort to shady dodgy methods to promote your little company.

    Its up to people to decide if they want to deal with a dishonest person like you.

    Check out these links if anybody is interested in PRman's opinion,
    on companyformation.ie. he runs the company and is pretending he
    has no association with it in order to try and convince people to use
    his services.

    Truely an act of desperation.

    http://www.google.ie/search?q=cbf.ie+site%3Aboards.ie

    http://www.google.ie/search?hl=en&q=companyformations.ie+site%3Aboards.ie


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