Whether it's for financial reasons, retirement, or simply because you've had enough of the business, there are myriad issues involved in winding down a business.
You can become a dual income couple – pay your spouse through the business up to the limit of his / her 20% Income Tax limit moving income from 41% to 20%. Look to earn tax-exempt income – rent-a-room ( €10,000 per year ), Patent income ( €250,000 per year ) 3.
Look to realise Capital Gains ( @ 33% ) rather than Income ( up to 41% plus PRSI of 4% plus Universal Social charge of up to 10% on all income ).
When you don’t take money out of the company, apart from through dividends or payroll, your director’s loan account will have a zero balance or possibly be in credit if you have put your own money into the company or used personal funds for expenses or company assets.
The complexities arise once a director’s loan account – often referred to as a DLA – becomes overdrawn.
Essentially, when a company sells a unit of its good or service, the revenue is matched with the newest inventory.
The LIFO method is used by companies during periods of rising prices, or periods of rising inflation, when the cost to purchase inventory increases over time.
Many tax options depend on getting notice in advance of transactions. Consider incorporating your business as there are many tax advantages. You can be taxed at Corporation Tax rates rather than Income Tax rates which would save a lot of money.
You could rent property to the company, and you could take advantage of retirement relief if you ever sell or wind up the company.
This liquidation causes a distortion in a company's net operating income, because the lower-cost inventory is recognized on its income statement.