Sole Trader or nothing in early company startup phase

R

RailsOnRuby

Guest
Consider this to be a variation on the sole trader or company question ....

I'm in the process of leaving PAYE employment to up a services business. All going well, this will be a conventional company, trading internationally, employing people, with premises etc. etc.

There are a few gating milestones to go through before I intend to get an investor involved and spend any significant money. If these pass I expect to gain an already identified friendly lead customer and will then incorporate, and will operate as a normal start-up. If not, then I intend to drop the idea. 50:50 chance, I think.

In the meantime (3 months?) , I want to keep expenses at a sensible minimum. I won't have any income. I won't be formally selling although I will be contacting several potential clients. I will have some expenses (I'm budgeting 10k) and would ideally like to be able to offsest them against PAYE.

The question is:
- should I float free for the moment (I may be obliged to sign on??)
- register as a sole trader
- incorporate

Your views please. Thanks.
 
"floating free" and registering as a sole trader are effectively the same thing.

You can't sign on if you are not available for work. If you are setting up your own business, you are not available for work.


If you have around €10k expenses, you should aim to have around €10k in income to cover them, before incorporating. I don't think you could claim the pre-incorporation expenses after you incorporate.

However, if you cease to trade, and you "lose" 10k as a sole trader , then you should be able to set this loss off against your total income for the year. Take professional tax advice on this though.

Brendan
 
Thanks Brendan & ClubMan.

If I put the question another way: let's s say that I spend my 10k between now and the end of the year, don't pass my gating criteria and drop the project. I won't have won't have earned a penny at this point. As a registered sole trader, I can offset this against PAYE paid earlier this year, otherwise I can't. Is that right?

I will get professional advice on this but your view are, in the meantime, very useful.
 
In a nutshell YES but expect Revenue to ask some pertinent questions so make sure you retain all documentation relating to your loss!
 
You can register as Sole trader at end of November and backdate the commencement date to 1 September therefore allowing you to utilise the losses. In theory you can only sign on if you are available for work. If you voluntarily leave your existing job you will not get any social welfare for at 6 (?) weeks. You already sound like you have a good grasp of the major issues. Good luck with your project. Great to hear that there are some chance takers left out there.
 
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