Choosing the right structure for your business is a big decision — and it’s one that can affect your taxes, your personal risk, and even your future growth.
If you’re wondering whether to stay as a sole trader or set up a limited company in Ireland, you’re not alone.
Let’s break it all down in plain English so you can decide what’s best for you — and how we can help if you’re ready to take the next step.
What’s the Difference Between a Sole Trader and a Limited Company?
Sole Trader
- You are the business.
- You’re personally responsible for all debts and liabilities.
- Income is taxed as personal income.
- Very easy and inexpensive to set up.
Limited Company
- The business is a separate legal entity.
- Your personal liability is limited to what you invest.
- Corporation Tax (currently 12.5%) applies to trading profits.
- More paperwork and formalities involved.
Key Factors to Consider
1. Tax Efficiency
As a sole trader, all your profits are taxed as personal income — at rates of up to 40%, plus PRSI and USC.
In contrast, companies pay 12.5% Corporation Tax on profits (for trading income), which can be far more tax-efficient if you’re earning higher amounts.
You can also leave profits inside the company, reinvest, or take a combination of salary and dividends to optimise your personal tax position.
2. Personal Risk and Liability
As a sole trader, there’s no legal separation between you and the business.
If the business is sued or goes into debt, your personal assets (like your house or car) could be at risk.
A limited company protects you — your liability is limited to your shareholding.
It’s an important shield, especially if your business is taking on contracts, staff, or larger projects.
3. Professional Image
Having “Limited” (or “Ltd”) after your company name often gives a more established and professional impression.
It can help when you’re pitching for contracts, seeking investment, or dealing with larger clients.
4. Costs and Administration
Setting up as a sole trader is fast and cheap — you just register with Revenue.
Running a company involves:
- Company registration with the Companies Registration Office (CRO)
- Filing annual returns
- Preparing annual accounts
- Maintaining statutory records
It’s more admin — but if you’re planning to grow, it’s usually worth it.
5. Future Growth and Investment
If you plan to expand, hire employees, or bring in investors, a company structure is often essential.
It’s also easier to sell a company (or bring in shareholders) than it is to sell a sole trader business.
When Staying Sole Trader Might Make Sense
- You’re just starting out and want to test your business idea.
- Your turnover is low, and there’s minimal risk involved.
- You prefer minimal paperwork and administration.
When Going Limited Might Be Better
- You’re earning €50,000+ per year.
- You want to protect your personal assets.
- You plan to expand, take on contracts, or employ staff.
- You’re thinking about long-term growth or selling the business in the future.
How We Can Help
Setting up a company can feel overwhelming — but it doesn’t have to be.
At Xcellent, we offer complete Company Formation Services to make the process simple, fast, and compliant with Irish regulations.
We’ll guide you through:
- Choosing the right structure
- Registering your company name
- Preparing incorporation documents
- Registering for tax (Corporation Tax, VAT, PAYE, etc.)
- Setting up your first financial systems
