Join an existing company as 2nd Director and work

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wonder29

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I'm getting into self-employment and don't want to be part of an umbrella company but instead as a Director of a company where I can pay myself a salary and also be able to contribute into Executive Pension Plan. I understand that I can register a company in my name and can have the above set-up - which is clear to me.


My query is:


My wife has a company registered in her name (she is the sole Director) and is into IT Contracting herself. Can I join her company as a 2nd Director and start working myself as a IT Contractor? I don't want to be an employee in her company.


My understanding is that this way we can have less paperwork and less things to manage on regular basis but not sure if this can be done or not?


Regards.
 
If you're in the same line of business (and you trust your wife!), I think you'd be a bit crazy to set up a second company: it doubles all the costs and obligations associated with having one, and I can't think of a single advantage.

It's up to a company to decide how to appoint directors and/or who to employ. The CRO has to be informed if there's a change of directors.
 
Watch the rate of PRSI that you are paying. If you receive a salary and own less than 50% of the company then you may be regarded as an employee (Class A1) with with the requirement that the company pays 10.75% employer contribution for you. This doesn't apply to director fees (Class S1) and there is a difference between fees and a salary.

If I was advising a client I'd recommend obtaining a ruling from Scope Section on your employment status and this is determined by a number of things - including your shareholding and whether you can be fired. You can always get your wife to transfer 50% of the shares to you as transfers between spouses are exempt from CGT. While this may create a marital issue this is not a tax issue.

There are different rules for when one spouse employs another spouse and this is class M - however in your case the employing entity would be the company and not your spouse.
 
Thanks Dublin67. I'm set up as director with 0 shares and hence as class A1. To whom does company need to pay the employer contribution in such a case?
 
wonder29 said:
I'm set up as director with 0 shares and hence as class A1. To whom does company need to pay the employer contribution in such a case?
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Highly unlikely that Class A1 applies in your situation. Get professional advice or risk making large PRSI overpayments for no benefits.
 
The employer PRSI contribution is paid the Revenue under the PAYE system.

I'd suggest getting a ruling from Scope Section of Social Welfare (or whatever they are called now) to confirm a Class S ruling. I agree with T McGibney that you risk making large PRSI payments with no benefits. I would not assume you are Class S unless you have a Scope Section ruling or own 50% - some may not recommend obtaining a ruling but I would.
 
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