Advantages to becoming a Director in a limited Company

Can anyone tell me what the advantages of becoming a director in a limited company are.

I am currently a employee of the company but also a 20% shareholder and now need to decide if directorship is the right direction for me.

Do you also want the disadvantages? - There are loads of these.

actually the disadvantages are probably more important

Some disadvantages are, if you become an 'S' class director you could end up losing social welfare benefits. You could also lose your PAYE tax credit, and end up paying a good bit more tax.
What shape is the company in?

You could become legally liable for the company's losses and/or loans if the directors act negligently ie allow the company to act illegally or not keep proper books of accounts

Hi All,
The company is making money and is in a good position with a very positive future.

Paying more tax - How sorry now for the questions, I'm useless at finance side of things, but very good at selling

Thanks

The only advantage is that you have a right to see the 'books' at any time so you know exactly how every cent is being spent - this is actually very important if you are a shareholder and expect to get dividends. Also, when you are at the AGM you would have a vote but you would need to be clear on whether it is 'one man one vote' or whether your vote counts as 20%.

When you are a director you can also be an employee and have A class PRSI. DO NOT change to S class.

Hi Fender,

thanks for your response. i'm already a shareholder, but work as a employee of the company also..
What is A class PRSI?

This entitles you to Jobseekers benefit and contributor pension payments. If you move to S Class and you find yourself out of a job you will get no help. You may also find that you will not be entitled to the contributor pension when you retire. Check it out on welfare.ie.

If you are an employee you are more than likely on A Class anyway. Most accountants move directors to S class as it is a lower cost for the company. You can stay on A Class as a director just make sure they do not change you over.

ok thanks a million for that advice.. you say it is a lower cost to the company, is there a tax advatage to me if I decided to move S class?

You say you are an employee of the company and 20% shareholder

You might want to look at rules of self-employed v employed

If it turns out you are seem as self empoyment both revunue and social welfare might want to put you on class s on inspction regardless

Who owns the under 80% shareholding, If married does husband own %

Should you have been made director when company set up day 1

Hi There Paper Value,

Thanks for advice, I'm definately an employee, the other 80 % is owned by 2 other shareholders non relation, who are both the directors of the company.

In relation to your questions..... should I have been made a director from Day 1... Yes I think, was too green, but learning quick now ........

if you own >15% you have to do a tax return .. pay and file by oct 31. Also i think there is connected persons implications, check this out with a solicitor ie husbands's tax status and maybe even actions of a connected person. As a director you may not be "limited" when it comes to debt. 3 of ye own the company? There could be other tax obligations as a "close company" not necessarily a heavier tax burden but a few more t's to cross when making distributions, if this is done incorrectly it may attract penalites. In your situation it would be worth paying a tax consultant for a hour, it could save you a fortune, you may be unaware of how the revenue view you or what you might be doing wrong at the moment and also not knowing is no defence.

Thank you all for these post's, its been really helpful. I recently got made a director of a new e-commerce business we adding to the company i work at as an employee. This was because i have previous managerial experience in e-commerce business. I am still an employee in the company and i have been thinking what advantages and disadvantages this might have on me. Would you say the thread above could apply to me as well?

Many thanks for any advice in advance.

Festus said:

I recently got made a director of a new e-commerce business we adding to the company i work at as an employee.

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This phrase stands out in your post: it sounds like this was something you just accepted without thinking too much about it. If that's the case, you should educate yourself on what you've just taken on (from an external legal point of view). There's some information on responsibilities of directors here: https://www.cro.ie/Publications/Publications/Information-Leaflets

As pointed out in previous posts in the thread, there are also (potentially) tax implications. This comes down to whether or not you have a sufficiently controlling interest, related to shareholding. If Revenue think you do (and it's NOT just if you have a more than 50% shareholding: it can be considerably less, depending on whether you are connected to other shareholders, the type of shares, whether the other shareholders are just external investors and so on).

The main advantage of being a director if you're a shareholder is you get full access to information on what's going on: the whole point of a director is to look after the interests of shareholders.

The main advantage of being a director if you're an employee is that it's the place where the ultimate direction and strategy is set, so if you want to have a direct input to this it's the place to be.

Shareholding, directorship and employment within a company are all independent attributes (i.e. you can be all three, any one, or any one of two).

Festus said:

Would you say the thread above could apply to me as well?

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Note AAM is in Irish site, so any advice here will be based on local legislation, and will only apply if you are based here.

Thanks for your advice. I never thought about it before accepting the position when it was offered to me, i felt it was a great opportunity to move up.

I am not a shareholder in the company, well at least not yet but i still work in the company as employee. I am launching the e-commerce section of the business in July and all of it will be manage and run by me. Many thanks again for your time

Festus said:

Thanks for your advice. I never thought about it before accepting the position when it was offered to me, i felt it was a great opportunity to move up.

I am not a shareholder in the company, well at least not yet but i still work in the company as employee. I am launching the e-commerce section of the business in July and all of it will be manage and run by me. Many thanks again for your time

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It is as you say a great opportunity to move up: as I said, the advantage for an employee is that it is the place (or rather, should be) where strategy is set. Depending on who the other board members are, it's a great opportunity too to see how boards operate. It can be extremely frustrating to be in a small company if you're not a board member and be subject to seemingly arbitrary decisions from the board without knowing how or why they've been made. As a member you have full access to all financial information, and you can present and argue your own case.

If you have no shareholding, there's no issue with Revenue, though no harm getting them to confirm it, or to give you an indication at what level of shareholding would become an issue for you. As I said, you should acquaint yourself with your responsibilities, but the other potential risks mentioned by others (e.g. possible personal liability or even criminal prosecution) are almost certainly extremely low unless you have the misfortune to be working with outright fraudsters who are hiding information from you.

Good one. Thanks a lot.

Just be aware of your responsibilities under the 2014 Companies Act and the penalties that can apply. Among other duties, you will have a personal responsibility to ensure the Companies Act is complied with fully.