The short version
| Sole trader | Limited company (LTD) | |
|---|---|---|
| Set-up | Register for income tax with Revenue — free | Incorporate with the CRO — around €50 CRO fee, plus professional fees |
| Liability | Unlimited — your personal assets are at risk | Limited to your share capital (subject to personal guarantees) |
| Tax on profits | Income tax up to 40% + USC + PRSI | Corporation tax 12.5% on trading profits; income tax only on what you draw |
| Admin | One annual Form 11 tax return | Annual return to CRO, financial statements, CT1, payroll for directors |
| Privacy | Accounts stay private | Some details are public on the CRO register |
| Credibility | Fine for many trades | Often expected by larger clients, agencies and lenders |
When does incorporating make sense?
A common rule of thumb is that once your profits are comfortably into the higher (40%) income tax band — and you don't need to draw every euro out personally — the 12.5% corporation tax rate and the ability to time your income start to outweigh the extra admin and accountancy costs. Contractors whose clients insist on a company, and anyone taking on real business risk (staff, premises, big contracts), often incorporate earlier.
Things people forget
- Money in a company belongs to the company — taking it out means salary, dividends or pension contributions, each taxed differently.
- Banks and landlords frequently ask directors of new companies for personal guarantees, which reduces the benefit of limited liability.
- You can start as a sole trader and move to a company later — many people do.
Frequently asked questions
Is it cheaper to be a sole trader or a limited company in Ireland?
Being a sole trader is cheaper and simpler to run. A limited company costs more in accountancy and filings each year, but can save significant tax once profits are into the 40% income tax band and you leave some profit in the company.
At what turnover should I set up a limited company?
There's no single figure — profit matters more than turnover. Many accountants start the conversation once annual profits approach €50,000–€70,000, or earlier if clients require a company or the business carries real risk.
Can I change from sole trader to limited company later?
Yes. You incorporate a new company and transfer the trade into it. It's a common move once a business grows — an accountant should handle the transfer to avoid unexpected tax.