New business startup

Hi,

Hoping someone can assist with the following query I was recently asked,

Basically a carpenter friend and three other friends have been working for a couple of years on and off on various jobs and were paid cash. They now wish to register as a ltd co. as more and more clients are asking them for proper invoices, vat reg no., in addition they want to avail of tenders from other builders/cos. They are concerned that they will be asked to explain where their income to date has been derived from.

My basic understanding is that they should file the relevant tax forms, (form 11, I think) to clear up any existing tax issues. Then going forward set up the company as required as per standard procedures regarding same. Also only two wish to set up the company and the others are likely to become employees of that company.

Could someone advise if my understanding is reasonable or if there are other issues that need to be considered.

Thanks in advance,

Re: New Business Start Up

There are so many issues here and so many possible scenarios
(a) on the back years and
(b) on how/when and in what form the "new" business should be set up that a consult with an accountant would really be the best way to get all the issues resolved.

Remember, if they want a C2 the owners/partners/directors will HAVE to prove past tax compliance for a number ( I think 3 ) years. If that only comes from them now "cleaning up their act" Revenue might still wait before issuing one to see how their current compliance goes.

Hi Graham,

Thank you for your reply.

1. The preferred route seems to be through the use of a ltd. co. In such event there are two currently interested in forming a co. with the others becoming employees, in such a case my understanding is that C2's would not come into play as all would be on the cos payroll. However presumably if the co. was applying for a C2 in respect of subsequent tenders then the past tax issues would become a potential issue as you indicate.

2. Of more concern/worry is the fact that to date most work done has been undertaken on a cash basis and no tax returns as far as I am aware off have been filed. They are concerned that this fact may impact there ability to form a co. or attract attention from the Revenue. My advice to date has been to contact Revenue and file returns for past income and take the hit for interest/penalties if such arises as all should have been completed previously.


Regards,

You are correct in your understanding. The owner/directors tax histories would be relevant for a company C2 application, although not those of their employees. Your advice in them contacting Revenue and filing the overdue past returns is also appropriate. It's a shame they didn't do this earlier but better late than never.