Kevin O'Higgins Solicitors

Start your own business now

Tuesday, 22 July, 2014
The Irish Independent
by Louise McBride

THINKING of skipping off the dole queue to set up your own business?

If you've just lost your job, the thoughts of joining a 350,000-long dole queue could be particularly daunting. Another 100,000 people are expected to join it by the end of the year.

If you were once a high-flying Celtic Tiger cub, a weekly dole payment of up to €204 will certainly be hard to swallow. But if you've got a bit of entrepreneurial spirit and have just pocketed a handsome redundancy payment, that lump sum could give you the opportunity to set up your own business.

This is no mean feat; if you don't do your homework, you could lose any redundancy money you pour into a new business, and more. So where exactly do you start if you want to get a business, that will support you and your family, off the ground?

GET THE RIGHT IDEA

To make any business a success, you must have the time and skills to run it. You must also be able to get customers and make a profit. It's important, therefore, to think carefully about what kind of business you'd like to set up, and to get the design of that business right.

"Whether you are building a house or setting up in business, the first step is to get the design right," states the Kerry County Enterprise Board's guide for start-up businesses. "There is little point building a house if you leave out the kitchen or bathroom or forget to look for planning permission. Similarly, there is no point setting up a business for which there are no customers."

RESEARCH THE MARKET

No matter how good your business idea, unless you research the market it could fall flat on its face. You must find out who your customers are, what they need, what they usually pay for your product or service, the size of the market, and what kind of competition you're up against.

Before jumping into any business, read the Kerry board's guide explaining how to establish whether a business will work. The guide, Feasibility Study Guidelines, is available on www.kerryenterprise.ie or by calling 066 7183522. The board also has a useful guide on franchises, as does the Irish Franchise Association (visit www. irishfranchiseassociation. com or telephone 01 8134555).

GET THE SHAPE RIGHT You also must decide on the shape of your business -- should you set up as a sole trader, a partnership or a limited company? While it is relatively simple to set up as a sole trader, if your business fails, your personal assets (including your family home) could be called on to repay your debts.

In a partnership, at least two people must agree to run the business. Just as all partners are jointly responsible for running the business, if it fails, all partners are jointly responsible for any unpaid debts. The safer route is to set up a limited company, according to Insomnia boss, Bobby Kerr, who is also one of the dragons on the RTE television programme Dragon's Den.

"The advantage of setting up a limited company is that the business is ring fenced," said Kerr. "There is an additional cost of keeping proper records and accounts, but it is well worthwhile. All the liability stays in the business and is kept separate from your other financial affairs."

Therefore, if your company gets into debt, the people or businesses it owes money to usually have a claim only on the assets of the company -- rather than your own personal assets.

To learn more about limited companies, call the Companies Registration Office (CRO) on 01 8045200 or visit www.cro.ie/ena/ business-registration-company.aspx.

START THE PAPER TRAIL

If setting up as a business, you must register the name of your business and ensure you pay the right tax.

If you're a sole trader or part of a partnership, you should register for tax as a self-employed person with the Revenue, using tax Form TR1 (www.revenue.ie/ en/tax/vat/forms/formtr1. pdf). You may also have to register for Pay Related Social Insurance (PRSI) and, depending on the annual turnover of your business, you may have to register for Value Added Tax (Vat). If you're a limited company, you must use Form TR2 to register for tax.

To find out more about how to register your business for tax, the type of records you should keep, how much tax you should pay -- and when, read Revenue's Starting in Business guide, which is available on its website (www.revenue.ie/en/tax/it/ leaflets/it48.pdf), by calling 1890 306706 or by dropping into any Revenue public office.

If you have never been self-employed or run your own business before, chances are this will be the first time that you (rather than an employer) are taking responsibility for paying your own tax. It's important not to put your tax bill on the long finger -- and to pay the correct amount of tax. Otherwise, you could face hefty penalties, possible prosecution, and naming and shaming. (You may find it easier to hire an accountant to look after your tax.) If you're a sole trader or partnership and you wish to use a business name rather than your own personal name, you must register this name with the CRO. (See www.cro.ie/ena/ business-registration-business-name.aspx). It costs €20 to register a business name electronically and €40 to register the name in paper. You can register online through the Companies Online Registration Environment (www.core.ie).

If you set up a limited company, you must register the company with the CRO and submit company reports and accounts to it each year. For more details on registering your business, as well as the company fees for doing so, contact the CRO.

GET ADVICE

Setting up your own business is a legal and tax minefield, so it's worthwhile hiring a solicitor or accountant for advice.

"Get proper advice, but negotiate fixed professional fees in advance," said Kerr. "You need to be careful that the advice doesn't cost too much or that you are not taken by surprise by any professional accounting, legal, or other set-up costs. Don't do it all yourself -- find a mentor. A burden shared can be a burden halved."

It could also be worthwhile attending the workshops run by Enterprise Ireland under its Enterprise Start programme. These are designed to help people understand how to become an entrepreneur, discover what it involves to run your own business, and to find out if entrepreneurship is the right choice. (For more details, visit www.enterprise -ireland.com/StartBusiness/ Starting+a+Business.htm).

GET THE MONEY

Even if you've got a handsome redundancy payout, chances are you'll need to raise some money to get your business off the ground, and to keep it running.

"It costs twice as much and takes twice as long as you expect (to set up your own business)," said Kerr. "I left Bewleys in December 1998 with a view to having my first coffee shop open by Easter. I eventually got it open in November 1999. Planning and legal delays are almost inevitable, so be realistic. Time is money when a project is delayed."

You may qualify for a grant from Enterprise Ireland if you have a high potential start-up (HPSU) business. To be an HPSU, your business must be headquartered or controlled in Ireland, be based on a "pioneering or innovative idea", generate annual sales of €1m and employ 10 or more people within three years of start-up, and have an international market for its product or service. For more information, contact Enterprise Ireland's HPSU start-up team on 01 7272972.

If you don't qualify for an HPSU grant, contact your local county or city enterprise board (see www.enterpriseboards.ie). As well as providing advice and mentors for entrepreneurs, these boards may also be able to arrange a small business grant for you, and offer financial support for training.

Regardless of whether or not you are going to Enterprise Ireland, your local enterprise board, or your bank, to raise money, it pays to have a good business plan in place and to have a head on your shoulders.

"Banks and funders often make their decision to finance a business based upon the viability of the business proposal and the ability of the owner or manager to manage the business," said the Kerry County Enterprise Board start-up guide. "To deal successfully with your bank and/or funders, you must be able to present your best possible case in as clear and concise a format as possible."

And a last word from the wise dragon: don't put your family home on the line to raise the money you need to keep your business running. "Avoid personal guarantees if at all possible," said Kerr. "If you have to give one, try to make it for a specific period of time."