Tax registration must take place with the business's local Revenue office, with sole traders (and partnership participants) required to fill in Forms TR1 and SE3.
Businesses which take the form of limited companies must submit form TR2. Forms TR1 and TR2 (or Form PREM Reg, if the employer is already registered for personal or corporate income tax) can also be used by employers to register for PAYE/PRSI. PAYE/PRSI registration is required if the small business in question pays:
However, business operations are generally required to register as an employer and pay PAYE/PRSI on the pay of their directors, even if there are no other employees.
NB that before such registrations can take place the small business owner must have a Personal Public Service (PPS) number. Irish nationals born after 1971, taxpayers in Ireland registered post-1979, or recipients of certain benefits may already have a PPS number; otherwise, Form REG1 should be completed, and presented to the Department of Social and Family Affairs, with proof of identity.
For sole traders, the procedures required before commencing activity are fairly few, although the trader must register for VAT if turnover is expected to be above a certain threshold, and for PAYE and PRSI if the business has employees (there are thresholds below which an employer doesn't need to register for this, but they are so low as to be generally inapplicable for most small businesses).
However, there are no other statutorily required documents that need to be filed by sole traders.
Partners would be well-advised to draw up a partnership agreement at the start of the venture, outlining matters such as the procedure to be followed in the event of a partner's death, or a dispute, the contributions made by each partner, and the way in which the profits and losses of the partnership are to be dealt with (for tax purposes, if for no other reason), amongst other issues.
However, this is really just for the protection of all concerned, and in other aspects, a partnership is less ‘paperwork heavy' than a limited company; accounts don't need to be published, and there is no audit requirement.
The rules for VAT and PAYE registration are the same as for the other corporate forms, and individual partners will need to pay tax under the self-assessment system, with each partner responsible for their own portion of the partnership's profits and losses (a personal and partnership return will need to be filed). Where a partner is a limited company, though, it will face corporation tax on its partnership income.
There is more to do in order to establish and maintain a limited company; in addition to the paperwork associated with the creation of such an entity (although company formation services will take on the bulk of this work for a fee), an annual return must be submitted to the Companies Registration Office, and accounts must be audited if your business profits are above EUR7.3 million annually; the company has a balance sheet total of EUR3.65 million; and/or you employ more than 50 workers. Said accounts may also need to be made available for public scrutiny.
Registration for corporate tax, PAYE, PRSI, and VAT (again, if turnover is above a certain amount) is also required.
This article is an extract from Personal Business Tax Guide , dated 4th January 2011, for the latest version please click here .