Hidden costs of setting up business?

FewFew

Hi,

I'm working my way through setting up a business, but I've no capital to invest at the start, so before I commit, I need to find out what costs I'm expecting.

Ok, so, it's actually more a case of can I afford to go from an unemployed student to limited company, or whether I should go for the cheaper (so it appears) sole trader route.

It's a service based company (internet, design stuff etc.) so there's no real cost and I've already got one client for a trial period of three months. So far the only 100% essential cost I can see is registering the company with the CRO, which seems to be €20 by doing it online, but... I'm afraid there's a sting in the tail coming somewhere.

At the moment I'm working out of my bedroom in my parents' house (complete boomerang kid while working on a thesis) so I don't want to cause any complications, and I'm hoping not to have to pay rates etc.

At the moment I'm not predicting major earnings or anything, just enough to cover the student loan and pay for living, sub 10 grand per annum if I don't expand.

So any advice on unforeseen essential costs would be appreciated.

srsly78

You don't register a company with the CRO you register the business name. This is not the same as setting up a company! It's probably sole trader that you are after - registering a name is good for this. Second step is to register with ROS as a self-employed person: www.ros.ie. Note you will have to submit returns every year.

Alternate route: You can setup a limited company for about e200, google for company formations agent. Strangely it's cheaper to use an agent than to do it yourself... Not to mention easier. Note you need a second director as well.

If you plan on doing any non-trivial amount of business you will want to register for VAT as well (whether sole trader or company). This can be done on ROS I think. Note that VAT returns are a lot of hassle so don't sign up on a whim if you are below the threshold.

One final tip: Be careful with "business bank accounts". If at all possible use a second personal bank account (keep affairs seperated). If it's a "business" account you actually get worse service from bank and loads of fees (am looking at YOU BoI), it's pretty outrageous.

FewFew

srsly78 wrote: »

Alternate route: You can setup a limited company for about e200, google for company formations agent. Strangely it's cheaper to use an agent than to do it yourself... Not to mention easier. Note you need a second director as well.

If you plan on doing any non-trivial amount of business you will want to register for VAT as well (whether sole trader or company). This can be done on ROS I think. Note that VAT returns are a lot of hassle so don't sign up on a whim if you are below the threshold.

One final tip: Be careful with "business bank accounts". If at all possible use a second personal bank account (keep affairs seperated). If it's a "business" account you actually get worse service from bank and loads of fees (am looking at YOU BoI), it's pretty outrageous.

Thanks for the help Srsly78

I knew the limited company option was looking too cheap. I knew I'd have to go to Revenue, but I thought when CRO were looking for memorandums etc. that they were the gate-keepers in terms of business start-up.

I'll have an aul business start-up search again, though I keep finding sites that mention things to do without any costings. Wondering where my €200 will go.

Is it easy (or possible) to switch from a sole trader to a private limited company and retain the same name? In the short term sole trader is now seeming like the way to go, but I don't like the exposure (not that I've anything worth suing for.)

ssbob

It's easy to go from being a sole trader to being a ltd company whereas vice versa is very difficult.

As you said you are going to be in the services industry so you will not have any exposure to loss of inventory etc. You may want to look into insurance if it is a case that you are leaving yourself liable for the work you do.

I wouldn't worry about the cost of that too much as it will save your bacon if anything ever did arise!

Axwell

Go the sole trader route, register a business name and then get on to Revenue on ROS.ie and set yourself up there. You can get a .ie domain once your business name is registered. You wont have to file tax returns until October 2013 so just keep everything together business related so you have invoices etc come October next year. That will be your income tax etc for 2012 as its always for the previous year.

Dont register for VAT starting off unless you think you are going to go over the threshold, which is unlikely starting small. This means you dont also charge for VAT with clients, so dont go adding that or you are going to have an accounting headache very soon. If clients ask why there is no VAT you simply havent reach the thresholds for VAT and arent required to register.

FewFew

Thanks for the advice, it does seem like the way forward. I'll revisit the limitied company at a later stage when I've time and money to do so.