Skip to main content

Why would you set up as a sole trader or limited company? Why would you set up your own business at all? These questions would have been furthest from the minds of thousands of small businesses owners – those that inadvertently turned a little hobby could turn into a booming business? Normally it starts out small where you are helping friends upgrade their kitchen cabinets or you sell a few jewelry pieces to coworkers. Then you receive more requests as the money adds up. In time, you are cutting back on regular work hours to work part-time for yourself as your hobby is slowly turning into a viable business venture.

You Need a Business Structure

Before you decide on the details of your business such as having a storefront or finding a materials supplier, you need to select a business structure. The business structure not only gives you legitimacy when working with customers or other businesses, it ensures you are paying all required taxes and following the established standards for your industry. You will also have to decide on how your business will incur liability and debts when performing services or selling products.

Sole Trader or Limited Company?

You may be debating between registering as a sole trader or a limited company. Both have their benefits and limitations, as you will need to examine your current and future business needs to select the right business structure. Keep in mind that a business structure is not set in stone, and you may decide to be a sole trader when first starting your business and then in the near future switch to a limited company. Here is a brief breakdown of each business structure.

Sole Trader

Most people become sole traders when they are first starting out. Basically, it means you are self-employed although you can still hire employees to help out. You will be taxed as a self-employed individual as you have to register through the Revenue Online Service to pay your tax obligations. Some of the aspects of being a sole trader include:

* You will be personally liable for any debts of the business

* You will pay income taxes on your profits

* You have to pay Class S social insurance contributions

A major benefit of becoming a sole trader is that your accounting is simpler than other business structures. Using accounting software, you only need to keep track of your business profits and costs.

Limited Company

While people may enjoy being a sole trader because of simpler administrative tasks while being self-employed, you may select to become a limited company when you are looking for more business credibility. There are many customers, business clients and investors who will not work with sole traders and will instead give their business to limited companies. Aspects of a limited company include:

* You must register with the Companies Registration Office

* Your company assumes risks and debts that it incurs

* Owners of the business will have shares, which you can sell to other people to obtain equity

* You will have to pay corporation taxes on any profits

While bookkeeping is more complicated with this business structure, there are many benefits of becoming a limited company. You can keep business debts separate from personal debts to lower risks of having your personal assets taken to pay business creditors. You’ll also be able to receive dividends and salary as income. When it comes to raising funding, you can get involved with investments as your business builds credibility with investors.

Every business owner must decide for themselves on which business structure will work best. Think about the type of business you are running, the number of owners, the types of business risks that will be incurred and other factors to select the best one for operations.

Sole trader or limited company, it’s an important decision. Don’t forget to engage with your financial advisor / accountant before you make any decisions. They are best placed to provide you with practical advice that will be best suited to your individual situation.

Marc O'Dwyer

After completing a Graduate program in Marketing, Marc’s impressive sales career began at Allied Irish Banks, Pitney Bowes and Panasonic where he received numerous Irish and European sales performance awards and consistently exceeded targets and expectations. In 1992, Marc’s entrepreneurial spirit led him to set up his own business, Irish International Sales (IIS). Initially, this company was a reseller for Take 5 Accounts and Payroll software. Within four years, IIS became the largest reseller of Take 5 in Ireland, acquiring four other Take 5 resellers. He also found time to set up two mobile phone shops under the Cellular World brand and a web design company offering website design services for small businesses. In 2001, he bought the majority share in a small Irish software business, Big Red Book. At that time, the company was losing money. The company became profitable within two months, and Marc then acquired a payroll company to compliment Big Red Books Accounting products. In 2003, IIS were appointed as Channel Partners with SAP for their new SME product, SAP Business One. Marc sold his Take 5 business and concentrated on developing this new market for SAP As a result, by 2007, IIS was recognised as the largest Channel Partner for SAP in EMEA (Europe Middle East and Africa). In 2008, the IIS Sales Manager bought the Company from Marc in an MBO. He launched Big red cloud in June 2012, the online version of big red book, to date the company successfully converts 59% of trials into sales and the number of customers is growing rapidly. Marc continues to run both Big Red Book and Big Red Cloud which now support 75,000 businesses. He is a very keen sportsman, having played rugby for 20 years, represented Leinster at under 16 and under 20 levels, and league squash with Fitzwilliam Lawn Tennis Club for 10 years. Marc has competed in 11 Marathons, including the London and Boston Marathons, and has completed several Triathlons and Half Ironman races. He has also completed six Ironman Races in Austria(x2), Frankfurt (Germany), Nice (France) , Mallorca (Spain) and Copenhagen (Denmark)

This site is registered on as a development site. Switch to a production site key to remove this banner.