So you have a new business idea and have sketched a brief business plan. What are your options in terms of structure and how do you decide which one is right for you? There are two main options open to entrepreneurs setting up in Ireland – sole trader and limited company.

Sole Trader

This is the simplest option. To set up as a sole trader you will need to register with the Revenue Commissioners and submit and income tax return once a year (deadline 31st October the following year).

The books are generally easier to maintain and do not have to be audited so accountancy fees would be lower compared with other structures.

Some sole traders register their business name with the Companies Registrations Office, for example florist Mary Ryan might register the name “Blooming Marvellous”.

Limited Company

A limited company is a legal entity separate to yourself. Shareholders liabilities are limited to the amount of shares they subscribe to whereas in a sole trade the sole trader has unlimited liability.

With a limited company if you are setting up in business you need to find another person to act as a Director. Although this will not be a required once the new Companies Bill is enacted later in 2014.

A limited company and its Directors are subject to more regulation than a sole trader but the company structure offers advantages in terms of taxation.  For example a company’s profits are taxed at 12.5% whereas sole trader profits are taxed at 20%/41% plus PRSI and the USC.

Every year Accounts must be prepared together with a corporation tax return and an Annual Return submitted to the Companies Registrations Office.

Company structures require more accounting and tax work but the additional fees involved should be more than covered by the tax savings in running a business through a company.

The company also provides a structure for introducing additional investors, giving shares to key employees or family members and selling shares in the business but closing down the company is more difficult and expensive than for a sole trader especially when there are outstanding debts and a liquidator is required.

Call us today for further information and advice in relation to tax reliefs which may be available to you.