Cashflow for LTD.

J

jj476

Guest
At present I run a small business as a sole trader. The business is solvent and profitable. It is more like a cottage industry as revenue tends to be very erratic and cashflow is hand to month.

For legal as well as business reasons i wish to change to a limited company. I have researched the tax, legal and auditing implications and i don't have a problem with that.

My question is how do small LTD's companies extract monies were their revenue is so erratic. Typically as a sole trader I can manage this. However i am finding it difficult to imagine how i can regulate the cashflow.

Do people set themseleves up as an employee and pay a low wage , then extract a a dividend at the end of the year( or quaterly for example).

Or do they just match their wages with revenue coming into the business and recalcuate the PRSI/ PAYE on a monthly( or weekly ) basis.

I would be grateful for any practical advice. The business is bascially a one person operation.

Thanks
 
There is nothing wrong with paying yourself different amounts each week or month, so long as you keep PAYE and PRSI in order. Alternatively, you can pay yourself a low wage, and award yourself bonuses (which would be taxable, of course) when the business can afford it.

Dividends are declared only after the annual accounts are drawn up, so it might not be a suitable mechanism for your purpose.
 
For a cottage industry employing one person with cash flow, the "legal and business reasons" would have to be huge to justify setting up a limited company. The costs, the hassles are really not worth it.
 
Thanks Brendan Padraig,

The "Legal and Business" reasons are significant and should more than compensate for the hassle.
 
You must log in or register to reply here.
Back
Top