Choosing whether to conduct your business in Ireland as a sole trader or a limited company is a key decision for every new business. There are some important differences to consider.

So often people are working hard at the wrong thing. Working on the right thing is probably more important than working hard. 

– Caterina Fake, Flickr Co-founder

Sole trader is somebody who is self-employed but is also the exclusive owner of their business. As the sole owner of your business, you and your business is considered as one legal entity, which simply means you are entitled to all profits or loses (after tax) and all benefits and associated risks.

Pros and Cons of being Self Employed

  • Start-up costs are low
  • Losses can be offset against other income that you may have
  • No requirement to file annual accounts with CRO
  • Easy to form, operate or wind-up
  • Unlimited Liability
  • Profits are taxed at your marginal rate of tax
  • Not suitable for large scale business
  • No continuity of existence

A limited company (LTD)  on the other hand is a distinct legal entity from the business owner (director). As director, you’re responsible for the legal and financial decisions your business makes, but your business’s assets and liabilities are totally separate from your own individual finances. Which means all profits and losses belong strictly to the company.

Pros and Cons of a Limited Company

  • Limited Liabilities
  • Increased scope for tax planning
  • Reduce taxable profits by making dividend payments
  • Directors pay income tax only on their salary and the company pays corporation tax on company profits
  • Ownership can be spread over a greater number of people
  • Registration legally protects the name of the company against anyone forming business in similar name.
  • Increased legal responsibilities for directors
  • Requirement to file annual return and annual accounts with CRO
  • More paperwork and cost involved in setting up and closing down the business
  • No continuity of existence