Posted Saturday November 21st 2015
Note: I am not a company agent, lawyer or an accountant. This is an overview of my knowledge from founding my own company in early 2014 and converting to the new Companies Act in 2015. It is your responsibility to ensure compliance with the Companies Registration Office and Revenue offices.
Video game companies are being created in Ireland more regularly than ever before. With recent successful Irish game developers like Digit Gaming, Terry Cavanagh and Sean Murray, more people are taking up the challenge of breaking into the industry.
However, information on how to set up a company can be quite confusing for a lot of people – so many options, requirements, terms, returns, and more! So the following is a brief guide on what you need to do to get your video game company started and run it on a year-to-year basis based on my own experience.
- Registering you company
- Share Capital
- Registering for tax
- Setting up a bank account
- CRO & Tax Returns
Some people establish their business as a sole trader. While this is easier (just requires registrations with Revenue), it means that all financial and legal liabilities will fall on yourself. It is safer to separate your personal finances and liabilities from your business’s.
From 2015 onwards, there are 5 types of companies you can register but typically you’ll either be setting up a Private Company Limited By Shares (LTD) or a Designated Activity Company (DAC). For each of these you can have up to 149 shareholders and all liabilities fall to the company and not yourself. Also, you do not require proper offices for these types of companies as you can use your permanent residential address as your registered office.
Private Company Limited By Shares
For companies with one director this is the only type of company that allows for this. However, if you do choose to only have one director, you’ll still need a second person to be the company secretary. Of course, you can have more than one director with one of them acting as the company secretary. For this type of company you’ll need to submit a Form A1 and a company constitution. This company type can undertake any activity.
Designated Activity Company
A DAG must have at least two directors and a company secretary. One of the directors can act as the company secretary. For this type of company you’ll need to submit a Form A1, a memorandum of association and articles of association.
It is up to you which type of company you register but note that it will affect some areas (e.g. bank accounts) which I’ve outlined in later sections. If you’re having difficulty with forms or establishing your company’s constitution, there are several companies such as irishformations.ie and companyformations.ie that offer services to help you setup your company for a fixed price.
Once you’ve completed and submitted all required documents, you’ll receive your Certificate of Incorporation with your designated company number.
Every company starts with an amount of authorised share capital stated in its constitution. Typically companies start with 100,000 shares @ €1 each – note this does not mean you must have €100,000 but that €100,000 worth of shares are available to be sold. Shares are then sold to people who become shareholders. As shares are sold, you must submit a corresponding B5 allotment form to the CRO. To increase the authorised share capital later, you must submit a signed resolution, B4 form and an updated constitution.
Next you’ll need to register for tax. To simplify the process of managing your registrations and submitting tax returns, I recommend registering for the Revenue Online Services (ROS) at revenue.ie. This process is similar to receiving a debit card – you’ll receive multiple letters from Revenue with your login information.
As a private company, you are required to pay Corporation Tax on all profits so this is the minimum required tax registration. Each tax registration has an official tax number that is different from your company number.
Other taxes that you may need to register for are outlined in later sections but these can all be done through ROS.
Next you’ll need to set up your company’s bank account. All banks provide facilities for this however the types of accounts and facilities available will depend on your company type. To register for an account you’ll require your Certificate of Incorporation, copies of your company constitutions and the passport and proof of address for each of the company’s directors. Most banks requires all directors to attend a meeting in a bank branch and bring all these documents with them along with any forms required to set up your account.
From experience, all banks’ online services for multi-director companies are terrible and generally charge >€100 per year after the first one/two years for the service. However if your company is a single director company, most banks will allow you to use the same online interface as personal accounts for free.
If you can’t afford an accountant you’ll need to keep track of your company’s accounts. This can be quite a daunting task for anyone (like myself) who has never done accounting before. If you’re looking for a basic introduction to accounting, I highly recommend Basic Accounting: Teach Yourself as it covers most of the account types you’re required to keep track of which will greatly simplify submitting your returns.
Small companies can avail of Audit Exemption if they meet certain criteria.
Annual Returns must be submitted yearly to the CRO. Failing to do so will cause you not only to lose Audit Exemption (meaning that your company accounts will be audited for two years) but you will also incur late filing penalties.
Your first Annual Return is due 6 months after the date of incorporation (usually seen on the Certificate of Incorporation) and then every year after that. So, for example, if your date of incorporation is 1st January, your first return will be due on 1st July and then on the 1st July every year after that.
For every Annual Return you are required to submit the following documents:
- Form B1
- Financial Statements consisting of the Director’s Report, Statement of Director’s Responsibilities, Profit and Loss Account and the Balance Sheet
However, you are not required to submit Financial Statements on your first return.
Ensuring your Financial Statements are compliant can be quite difficult. Personally I recommend hiring an accountant to create these. If you’ve handled your accounts yourself, many accountants will assist with creating the Financial Statements based on the abridged accounts at a lower price than having them creating accounts themselves.
Value Added Tax (VAT)
VAT is applied to any sales and purchases.
If your company revenue is below €75000, you are not required to register for VAT. However if you are selling online directly to customers, you will need to register for VATMOSS as you will be required to charge VAT based on the country of the customer and submit the appropriate returns. Otherwise if you’re selling your games through Steam or the Humble Store, they will handle VAT charging to customers and you’ll receive the revenue share corresponding to your partner agreement.
You need to submit your VAT3 returns bi-monthly for the first year you are registered for VAT but afterwards can opt to change to monthly or quarterly returns. Each year you also need to submit your VAT RTD (Return of Trading Details).
Corporation Tax is paid on any profits the company makes. If you make a loss you do not pay Corporation Tax but are still required to submit your returns.
The accounting period covered by your corporation tax return cannot be longer than 12 months. This may mean that you’ll be required to submit two returns to cover your first accounting period.
If you employ people at your company you are required to set up PAYE and PRSI. I don’t have experience with this as I’m an unpaid company director and we have yet to employ someone at Battlebard Games.
All beneficial owners of a company (those who own 15% or more) are required to submit an Income Tax return each year (even if you are employed elsewhere). Forgetting to do this will result in penalties (I learned this the hard way) being applied based on the amount earned in a year.
Running a company is quite challenging and will take up a lot of time. I recommend building your MVP and testing the market before committing to the responsibilities of running a company. That said, it will push you to follow through with your game’s vision and hopefully you’ll be met with success.