So you have decided to set up a new business but you are unsure as to whether you should set up as a company or as a sole trader. How do you decide which route to take? Your friend has a business and trades through a Company but your brother also has a business but trades as a sole trader.
What are the differences between the two?
Company
- Lower tax rates – a company’s profits are taxed at 12.5%
- More credibility
- The shareholders in a company have limited liability
- Must submit annual accounts to the Companies Registration Office
- Fines and penalties for non-compliance with Company Law
- Company pensions are more favourable
Sole Trader
- Higher tax rates – up to 52%
- No limited liability –personally liable for debts
- Not required to prepare accounts
- More privacy
- Easy to set up and easy to close
There is no right or wrong choice between operating as a Company or sole trader. A lot of the decision making is down to personal choice. There is a barometer that can be used to determine whether a Company or sole trader structure should be used. If profits are expected to exceed circa €75,000 then a limited Company structure may be more beneficial.
If you have recently set up a business or are thinking of setting up a business, contact us at APM Accountants to discuss your options.
