How do I decide whether to trade as a Sole Trader, Partnership or Limited Company?
When setting up a business, you may choose to set it up as one of the following: sole trader, partnership, limited company or co-operative.
The one you choose to trade as will depend on the following:
- The kind of business that you are starting.
- The expectations of those with whom you plan to do business. Some people will only deal with limited liability companies and are very wary of other entities.
- The expected level of turnover for the business. Those businesses with a turnover of >€130,000 per annum are usually better off forming a limited company for tax purposes.
- How you wish to organise your tax affairs (limited liability companies can avail of more favourable tax rates).
- Your attitude to risk.
If you choose to set up a limited company, there are various tax issues and other legislative issues that need to be considered so it is important to seek professional advice from an accountant prior to set-up.
In Summary:
Sole trader
This is the most straightforward way to set up your own business.
- As a sole trader, you are the owner of the business.
- You are legally liable for the business and do not have any protection if the business fails.
- If the business is not successful, all of your assets (business & personal) can be used to pay off your creditors.
Private limited company
- A legal entity, separate from its shareholders
- If the business fails the shareholders are only liable for any amount outstanding on the share capital they subscribe
Partnership
- An agreement between two or more people to go into business together
- If the business fails, each partner is liable for all losses
- A ‘Deed of Partnership’ is usually drawn up outlining the obligations of each partner
Please note: it is highly recommended that you consult an accountant or solicitor before choosing an ownership structure for your business
For further information on business structures you can visit the Companies Registrations Office (CRO) Website
