SOLE TRADE VS LIMITED COMPANY

Sole Trader or Limited Company?

Choosing the Right Structure for Your Business

The structure you choose when starting a business can affect your tax position, personal liability, administration and how your business develops over time.

WDA can help you understand the differences between operating as a sole trader and trading through a limited company, so you can choose a structure that suits both your current circumstances and your future plans.

Not sure what kind of business entity you’d like to register?

If you’re in a start-up phase or you’re just not sure what kind of business entity you’d like to register, always refer to your accountant before making a decision.

If you’re an individual, a professional or trades-person, it may be more cost efficient and easier for you to trade as a self-employed person. You can always upgrade to a limited company after your business has grown. Often businesses start off as sole traders as the benefits of incorporation may not initially outweigh the additional administration and cost of operating as limited company. In this scenario it will be very straight forward to incorporate the business at a later stage.

When you decide to trade as a self employed individual, we shall register a business name for you and register you for all taxes required. We shall assist you with setting up a bank account and recommend solicitors, insurance brokers etc to make the set up process as smooth as possible.

Overview of respective ADVANTAGES of each structure

  • Quick and easy set up;
  • No annual filing requirements with the Companies Registration Office;
  • For tax purposes, losses can be offset against other incomes

  • Limited liabilities. The limited company is considered to be a separate legal entity to you as an individual;
  • Low rates of corporate taxation, 12.5%
  • Potential to raise finance through share issues
  • Increased scope for tax planning, particularly in terms of pension contributions. Funding your pension through a limited company is very tax efficient.

Overview of respective DISADVANTAGES of each structure

  • No protection for your personal assets should the business fail and you become unable to pay your creditors;
  • Profits are taxed at your marginal rate of tax i.e. 51% (PAYE+USC+PRSI)

  • Increased legal responsibilities for directors;
  • Requirement to file annual return and annual accounts with the Companies Registration Office;
  • More paperwork and cost involved in setting up and closing down the business.

Which Structure Might Suit You?

A Sole Trader Structure May Suit You If...

You are starting a relatively straightforward business, want to keep administration to a minimum and do not yet require a more formal corporate structure. It can also provide a practical way to begin trading while the business is still establishing itself

A Limited Company May Suit You If...

You expect the business to grow, want greater separation between your personal and business affairs, intend to retain profits within the business or require additional flexibility around ownership, investment and tax planning.

The Decision Is About More Than Tax

WDA can help you consider:

Personal Liability

The level of financial and commercial risk involved in your business.

Expected Profits

How much the business is likely to generate and how much income you need personally.

Future Growth

Whether you expect to employ staff, attract investment or expand.

Pension Planning

How the structure may affect your longer-term retirement planning.

Administration

The level of accounting, filing and compliance work associated with each option.

Exit & Succession

How ownership of the business may develop or transfer in the future.

Overview of respective ADVANTAGES of each structure

  • Quick and easy set up;
  • No annual filing requirements with the Companies Registration Office;
  • For tax purposes, losses can be offset against other incomes

  • Limited liabilities. The limited company is considered to be a separate legal entity to you as an individual;
  • Low rates of corporate taxation, 12.5%
  • Potential to raise finance through share issues
  • Increased scope for tax planning, particularly in terms of pension contributions. Funding your pension through a limited company is very tax efficient.

Overview of respective DISADVANTAGES of each structure

  • No protection for your personal assets should the business fail and you become unable to pay your creditors;
  • Profits are taxed at your marginal rate of tax i.e. 51% (PAYE+USC+PRSI)

  • Increased legal responsibilities for directors;
  • Requirement to file annual return and annual accounts with the Companies Registration Office;
  • More paperwork and cost involved in setting up and closing down the business.

Contact Us

Lets start a conversation

Whether you have a specific requirement or would simply like to discuss how WDA can support your organisation, our team would be happy to hear from you.

Get in touch today and one of our team will come back to you.

  • (01) 6771411

  • info@wda.ie

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