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Companies and Sole Traders

Limited Companies: Overviewcompanies_2

When a company is formed, the individuals who own the company are called shareholders, while those who run and manage the company are known as the directors (in 99% of small companies the shareholders and directors are the same people).

A company is a legal form of business organisation. It is a separate legal entity and, therefore, is separate and distinct from those who run it. The company (and not the individual shareholders) is the appropriate person to be sued in the event that debts are incurred by the company which remain unpaid, despite demand.

Companies Annual Reporting Requirement:
  • Prepare a set of financial statements each year
  • Submit an abridged version of these financial statements and a B1 form to the CRO each year
  • Submit details of new directors/secretary or change of details (address etc) to the CRO each time there is a change
  • Submit the companies tax return the to Revenue commissioners each year (form CT1)
  • Submit P.35 to the Revenue Commissioners each year and any other tax forms which the company may be liable to
Directors Tax Obligations:

If you are a director of company and own more than 15% of the share capital then the following reporting requirement applies to you:

File an Income tax return for each calendar year no later than 31st of October of the following year.

Costs & Servicecompanies

Many of our clients prefer to use our company service package which is design to meet all the needs of a small business over the course of a trading year and would include the following (based on being audit exempt):

  1. Year end Financial Statements
  2. Company’s Annual Tax Return (C.T.1)
  3. Directors Annual Tax Return (Form 11)
  4. Companies Office Returns (Form B1 and Abridged Financials Statements)
  5. Annual P.35 Return

Typically, the fee would be €1,200 per year (depending on size and complexity of business) and payment can be spread out over 12 months

Audit Vs Audit Exempt Financial Statements

Most small companies (except companies limited by guarantee and certain regulated entities such as brokers and investment intermediates) will be able to prepare un-audited financial statements which can result in significant costs saving from €1,500 plus per year.

Warning: The entitlement to prepare and submit un-audited financial statements is lost, for two years if your company’s annual return is submitted late (see Companies Registration Office section)

Companies Registration Office / The Annual Return

Form B1The Annual Return DateDon't be late
An annual return (Form B1) is a document setting out certain prescribed company information which is required to be delivered by an Irish company, whether trading or not, to the CRO once at least in every calendar year.
An Annual Return Date (ARD) of a company is the latest date to which an annual return must be made up. The annual return must be filed with the CRO within 28 days of the date to which it is made up
If a fully compliant document is not delivered to the CRO within 28 days of the Annual Return Date, the company will incur late filing penalties off €100 plus €3 per day and lose any entitlement to claim audit exemption for two years

Company Types

There are a number of company types:

Limited company

The shares in a company are owned by its shareholders. If the company is a limited liability company, the shareholders’ liability, should the company fail, is limited to the amount, if any, remaining unpaid on the shares held by them. A company is a separate legal entity and, therefore, is separate and distinct from those who run it. Only the company can be sued for its obligations and can sue to enforce its rights.

There are four types of limited company:

  • A private company limited by shares: The members’ liability, if the company is wound up, is limited to the amount, if any, unpaid on the shares they hold. The maximum number of members is 99.
  • A company limited by guarantee not having a share capital: As this is a public company, there must be a minimum of seven members. The members’ liability is limited to the amount they have undertaken to contribute to the assets of the company, in the event it is wound up, not exceeding the amount specified in the memorandum. If a guarantee company does not have a share capital, the members are not required to buy any shares in the company. Many charitable and professional bodies find this form of company to be a suitable vehicle as they wish to secure the benefits of separate legal personality and of limited liability but do not require to raise funds from the members.
  • A company limited by guarantee having a share capital: As this will be a private company the maximum number of members is 99. The members have liability under two headings; firstly, the amount, if any, that is unpaid on the shares they hold, and secondly, the amount they have undertaken to contribute to the assets of the company, in the event that it is wound up.
  • A public limited company: This company type must have a minimum of seven members. Their liability is limited to the amount, if any, unpaid on shares held by them. It should be noted that it is unlawful to issue any form of prospectus except in compliance with the Companies Acts 1963-2012. The nominal value of the company’s allotted share capital must not be less than €38,092.14, at least 25% of which must be fully paid up before the company commences business or exercises any borrowing powers.

Proper Books

Company accounts and the euro

The requirement that a company keep proper books of account is contained in section 202 of the Companies Act 1990. Section 202(1) provides that:

every company shall cause to be kept proper books of account, whether in the form of documents or otherwise that –

  • correctly record and explain the transactions of the company,
  • will at any time enable the financial position of the company to be determined with reasonable accuracy,
  • will enable the directors to ensure that any balance sheet, profit and loss account or income and expenditure account of the company complies with the requirements of the Companies Acts, and
  • will enable the accounts of the company to be readily and properly audited.

Section 202(3) requires the books of account to contain-

  • entries from day to day of all sums of money received and expended by the company and the matters in respect of which the receipt and expenditure takes place,
  • a record of the assets and liabilities of the company,
  • if the companys business involves dealing in goods – (i) a record of all goods purchased, and of all goods sold (except those sold for cash by way of ordinary retail trade), showing the goods and the sellers and buyers in sufficient detail to enable the goods and the sellers and buyers to be identified and a record of all the invoices relating to such purchases and sales, (ii) if the companys business involves the provision of services, a record of the service provided and of all the invoices relating thereto.

Proper books of account are those which give a true and fair view of the state of affairs of the company and explain its transactions (section 202(4)).

In any case where there has been breach of section 202 of the Companies Act 1990, the auditor is, in addition to complying with section 194(1) Companies Act 1990, required to consider whether the breach is required to be reported by him/her to the Office of the Director of Corporate Enforcement pursuant to section 194(5) Companies Act 1990.