Business start-up – sole proprietorship or limited liability company?

Starting a new business is an exciting time, but it can also be a very stressful experience. Although errors do occur, some important decisions are important from day one.

Andrew Lambe of Company Bureau Training Limited, writes Andrew Lambe.

A common dilemma for aspiring entrepreneurs is the choice of legal structure: a single entrepreneur (partnership if two or more people are involved) or a limited liability company. The main difference is that a single operator is legally and financially tied to their business by the same entity / person as the company / individual operator. A limited liability company is a legal entity (directors and shareholders) separate from the person (s) involved and is subject to a legal document called Constitution (Corporation) and the Law of 2014 Companies. manages the company on behalf of the owner / shareholder, although it is usually the same person.

There are a number of factors that can help you choose the best option for your business. Some of these are shown in the following table:

Sole proprietorship / partnership

Company with limited liability

installation fees

Minimal. 20 € to register a company name. A TR1 form must also be submitted to Revenue.

The registration of a limited liability company by a representative costs about 300 €. A TR2 form must be submitted to Revenu.

Liability for debts

Unlimited liability – the entrepreneur is personally liable for the debts of the company.

As the Company is a separate legal entity, the limited liability protects the Directors / Shareholders.


Identical to the individual. All profits are taxable according to the rules of income tax (20% to 40%), regardless of whether they are paid or not.

A little cheaper than the only dealer. Profits can be taxed at 12.5%. Only the remuneration paid to the Company by the Board of Directors is subject to income tax. Relief of the available starting capital.

Annual fees

Accounting costs of 500 to 1,000 euros per year.

Billing fees of around € 1,500 per year. This increases when the company demands an audit.

Name of the company

No name protection except trademarks.

Protection for the company name.

Annual needs

Tax return, VAT return (if applicable).

Tax return of the Director plus the corporation tax return and the annual tax return and accounts of the CRO. VAT returns (if applicable).

Eligible expenses

All costs must be paid in full, eg motor costs, journey etc.

The costs of the Directors are reimbursed by the Company through certified receipts with receipts.

Disclosure of accounts

The public does not see the accounts when they are classified as income.

The public can access “short accounts” if they pay a small fee to the CRO.

Access to funds

Very difficult Perhaps a personal loan from the bank is required.

The status of a stock corporation can be considered cheaper by both banks and customers and suppliers. If necessary, units may be issued to investors for exchange of venture capital.

Pensions / wealth creation

Identical to the individual. Can pay a pension, but the tax relief for pension contributions is limited, depending on the age and maximum level of discharge.

Much cheaper than the only dealer. Pre-tax corporate profits can be virtually retired tax-free for senior executives.

Business Succession

The business ends with the death of the owner.

More than one succession planning operator. The shares can be transferred / sold so that the business does not stop.

Closure of the company

Income and CRO communicated. The individual can do it.

Notified income and voluntary derecognitions are required and cost about 300 €. Professional support may be required.

The decision can be easy for you or not. For example, a company that generates € 100,000 in its first year of business needs a high degree of credibility and, if limited liability is important, should be better used than a limited liability company. For a person selling cakes in a weekly market with a turnover of 8,000 euros per year, an independent retailer would be best suited. It is important to know that you can start as a retailer and later switch to a limited liability company as needed.

If you still do not know which option is right for you, it’s best to consult with a certified public accountant or tax consultant. A good accountant will evaluate your company in detail and give you a professional recommendation based on the key factors.

Congratulations once again that you have made the bold decision to start your own business, and we wish you every success with your new business!

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