Importance of Professionally Created Accounts for Startups
With most startups, it is vital to keep costs under wraps at all times. This is a good theory to live by, but in your quest to keep costs down, don’t look to false economies to do this.
A problem we encounter fairly often is businesses that spend countless hours each year creating and submitting their own accounts. A professionally prepared set of accounts, can be created quickly, with a minimum input from you and will probably end up saving you money. Most of the time, business owners would be better off spending their limited time doing what they do best and leaving the bookkeeping to the professionals.
Reasons to entrust us with your annual accounts include:
- If you need a mortgage in a few years time, you may need to enlist the help of an accountant anyway, as many banks require at least 3 years audited accounts.
- If you are audited by Revenue, your own bookkeeping methods may not meet the standards required.
- Professional Accountants, such as Moloney and McCarthy and Associates, have years of experience of tax law and will make sure you don’t pay any more tax than you are obliged to.
- Tax laws are changing each year. We keep up to date with these changes, so you don’t have to.
- This is what we do every day. We know what to look out for and can more than likely do it faster and better than you.
If you would like to discuss working with Moloney and McCarthy and Associates about your end of year accounts, just call John or Pat on (068) 22455 for a free, no obligations consultation. We would be delighted to speak with you.
Who should consider setting up a company?
- Farmer who is paying significant income tax at 41% (53% with USC and PRSI).
- A farmer who does not need a significant portion of their farm profits for living expenses.
- Has already looked at all other tax deduction options like family wages, partnerships, pensions.
- Has more than 10 years left before they retire
- Plan on expanding their business over the next 10 years and will require borrowings to fund expansion.
- Has substantial net assets to transfer to the company
- Corporation tax rate is 12.5% compared with a 53% marginal rate of tax.
- If the farm business is expanding and you have secured loans inside the company, the loans are paid back much quicker due to only paying 12.5% corporation tax. Loans are repaid from after tax profits.
- There is limited liability in a company. If the business fails your liability is limited to the amount of the net assets of the company.
- You have more flexibility with pension contributions within a limited company. Pension contributions is a common method used to remove excess funds from a company.
- Higher accountancy costs, more paperwork.
- Money retained is not for director’s personal use.
- No income averaging available within a company. This is not a major problem as corporation tax is only 12.5%
- Balance sheet is on public view via the Companies Registration Office.
- Succession planning can be more complicated.
Before you consider forming a company you should sit down with your accountant and go through all the pros and cons. Every farmer is different and you have to look at all the obstacles and weigh up the advantage.
The Universal Social Charge came into effect on the 1st of January 2011. This ia a tax payable on gross income, includind notional pay, after any relief for certain trading losses and capital allowances, but before pension contributions. This replaces the health contribution and income levy.
All individuals are liable to pay the USC if there gross income exceeds €4,004 per annum for 2011 and €10,036 for 2012.
The rates applicable are as follows:
No Medical With Medical
The first €10,036 2% 2%
The next €5,980 4% 4%
The remainder 7% 4%
Also people aged 70 or over pay 4% on income over €16,016 and not at 7%.
What people do not realise is they may have overpaid there USC charge and should contact their accountant to look into it. Especially people that have a medical card should look into the matter. If you have any queries on the above please contact us.
Land and buildings (situated in an EEA state) which is:
- Acquired on or after the 7th December 2011 and up to and including the 31st December 2013.
- Continues in the same ownership for a period of at least seven years from the date the land or buildings were acquired.
There will be no capital gains tax payable on the capital gain in the seven year holding period. The best way to explain this is by an example:
John purchases 50 acres of land on the 1st of May 2012 for €500,000. He sells the land on the 1st of May 2019 for €700,ooo. He makes a profit of €200,000 and pays no capital gains tax. The capital gains tax at the moment is 30%, capital gains tax saving is €200,000 at 30% = €60,000.
Lets assume John held the land for 10 years and sold it at the same price €700,000. The capital gain is €200,000 but his relief this time is €200,000 at 30% x7/10 =€42,000. John pays €18,000 capital gains tax.
Land prices are improving slightly at the moment and house prices may not have bottomed out yet, it maybe a good time to invest and availe of this capital gains tax holiday.