1. What are the legal obligations of becoming self employed?

2. How do I register a business name?

3. Can you tell me about the legal status of a business?

 

1. What are the legal obligations of becoming self employed?

a) You need to register as self-employed with the Revenue Commissioners

Use the Revenue commissioners TR1 form.  This is used to register “persons” for income tax, VAT and as an employer for PAYE/PRSI.  You don’t have to register for all of these – often registering for income tax is sufficient to start.  You can always register for VAT or as an employer as the need arises.

“Persons” include:

• Individuals
• Partnerships
• Trusts
• Unincorporated Bodies (i.e. not a Limited Company)

You can obtain the TR1 form from your local Revenue Commissioners office, to whom you should return it after completion.

On receipt of the TR1, the Revenue Commissioners will post out a “Notice of Registration” to you which confirms that you are registered for income tax, and if appropriate, VAT and PAYE/PRSI.  This will also state your tax Registration Number, and the effective date of registration.

Limited Companies should use the Revenue Commissioners TR2 form.

b) Health and Safety Statement

Every small business is legally required to have a Health and Safety statement, which must be displayed.  Preparing a Health and Safety statement is simply common sense.  Your Local Area Partnership should be able to help you with this, as can the Health and Safety Authority, who have produced a booklet called “Guidelines on preparing your Safety Statement”.  You can download it from www.has.ie

c) Safe Pass

If you are in any aspect of the building-trade, you need a Safe Pass before you are allowed onto any building site.

It is obtained by doing a one-day training course, which ends with a short, multiple-choice test, which you must pass.  The course is simply common sense rules for site safety, and most people would have little difficulty in obtaining a Safe Pass.  But it is important to apply this common sense on a daily basis.

You can find out where and when the courses are being held by phoning your local FAS office.  There is a charge for attending the course, which may vary from place to place.

2. How do I register a business name?
 

If you wish to trade under a business name, you need to register the name with the Companies Registration Office, Parnell House, 14 Parnell Square, Dublin 14.  Tel: 01 8045200.  Website is www.cro.ie.  Their informational leaflet No. 14 (Business Name Registration) is useful.

You should use the CRO’s RBN1 form for a sole trader, or RBN1A form for a partnership.  (These forms can be downloaded from the web-site)

The current cost to register a business name is €30.

When the business name has been registered, the companies Registration Office will send the Certificate of Registration, which you must display prominently at your place of business.  If you wish to open a bank account in your trade name, the bank would certainly wish to have a copy of your Certificate of Registration.

Registering a business name with the companies Registration Office should not be confused with registering a Limited Company with the CRO.  The two are unrelated

3. Can you tell me about the legal status of a business?
 

 a) Sole Trader

This is the most common status for a new business.  Being a sole trader means just what it says – you are running the business alone, and are responsible for every aspect of it.  You need to ensure you get your money in, pay the bills, deal with the bank, advertise, keep books, ensure your tax and VAT returns are sent in on time, as well as physically work in the business.

If you get into debt, your creditors would have a claim on your personal estate, for example, your home or car, which can be rather unnerving.

To set up as a sole trader, you r main legal obligation is to register as a self-employed person with the Revenue commissioners (use the TR1 form).  Some businesses require a licence, such as a pub, betting office or hackney driver.  You should have the appropriate licences in place before you start up.

b) Partnership

A partnership is formed where two or more persons come together and agree to run the business in partnership with each other.  Partnerships are regarded as the same as Sole trader – the partners are jointly responsible for running every aspect of the business.

If you get into debt, you and your partners are jointly responsible, and may be sued.  In the event of one partner absconding, (disappearing without trace), the remaining partner or partners are responsible for the full debt.

Partnerships can work successfully, especially if the various partners have different areas of expertise, and are capable of running different parts of the business.  However, partnerships have a habit of breaking down, usually due to disagreements between the partners.  For this reason, it is essential to have a partnership agreement prepared by a solicitor.  The solicitor will guide you on this, but typical clauses would cover:

• amount of capital to be invested by each partner
• proportion of profits (as drawings) for each partner
• what happens if a partner becomes ill and can no longer work?
• what happens if a partner dies?
• control of banking – Who signs cheques?
• whether holidays or days off will be paid

To register a partnership with the Revenue Commissioners, use the TR1 form.

c) Limited company

Generally speaking, forming a limited company would not be necessary for a small new start up, although there may be circumstances in which it would be advisable.  You should consult your accountant about this.  If you do decide upon a Limited Company, your accountant or solicitor will register the company with the Companies Registration Office in Dublin.  Once this is done, the company has some legal obligations.  The main ones are to:

• keep a Company Register
• hold an Annual General Meeting every year
• file company reports with the Companies Registration Office every year
• Have its books audited by chartered accountants every year, and lodge the accounts with the Companies Registration Office every year

 A Limited Company means that you are paid a salary by your company, which is the legal entity, as distinct from drawings out of profits, as is the case with the sole trader or a partnership.  If the company gets into debt, then the creditors may usually only have a claim on the assets of the company.

To register with the Revenue Commissions as a Limited Company, use the TR2 form.

Limited companies should also be aware of the Office of the Director of Corporate Enforcement (O.D.C.E.).  This body has been established recently to ensure that directors of companies comply with the Companies Acts 1963-2001.  In the event of non-compliance, the O.D.C.E. may bring criminal or civil proceedings against the defaulting directors. 

The O.D.C.E. has published seven clear booklets, which are available from:

Office of the Director of Corporate Enforcement

16 Parnell Square

Dublin 1

Tel: 01 8585800

Web site – www.odce.ie 

If you are establishing a Limited Company, it is strongly recommended that you obtain these booklets.