What’s better a sole trader or company?


This is a very good question and we will need to get a better understanding of what a Sole Trade business is and what a company is – then we can look at the pros and cons of each one.


1) Sole Trade


There are many advantages of being a sole trader – the biggest one is that you are your own boss. You can decide how, where and when you work.

The main advantages are:

  • Easy to establish the business (register for tax, business name and bank account)
  • Easy to shut down (just stop trading and deregister for tax)
  • You keep all the profits
  • There are cheaper accounting costs (~€500/year for tax returns)
  • No need to do Corporation Tax returns
  • No need to prepare and publish Financial Statements
  • There is less paperwork involved (no B1 Annual Returns to file)
  • Can change to limited company later if necessary

There a few disadvantages however, such as:

  • You will get taxed straight away on all profits at up to 40%
  • You are personally liable for the company – if things go badly and you owe other people and businesses money, they could repossess all of your belongings (including your house!) to reclaim their debt
  • Compared to self-employment within a company, there are much lower income tax credits
  • You will need to do a tax return each year (which can be stressful and costly)


2) Limited Company


Personally, we prefer the company approach when setting up a business – and there are a number of reasons for this.

Here are the advantages of setting up a limited company:

  • Profits are taxed at 12.5%
  • There are more tax reliefs and benefits available
  • Your personal assets are protected as the liabilities are limited to the company only (hence “Limited Company”)
  • It offers a sense of credibility to your business and looks more reputable
  • You are able to easily sell the business in the future if need be
  • There are greater tax efficiencies possible
  • You can control your income (great for managing taxes) by keeping retained profit in the company

Of course, there are also a few disadvantages with setting up a company:

  • There are a lot more filing obligations (e.g. B1 Annual Returns, Register of Beneficial Ownership filing, Corporation Tax, Financial Statements etc)
  • There are large fines and penalties for non-compliance
  • It is generally harder to set up and close down


3) Final Note


So there you have – aside from the fact that companies are more bureaucratic and have more paperwork involved, it is the safer and better option by far in my opinion. But of course it depends on what type of business you are setting up. If you are just a casual freelancer, being a Sole Trader would be the better option. But if you want to build a scaleable business – then you should definitely consider forming a limited company.

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Mark Sweetman, ACA

Mark Sweetman, ACA

As a Chartered Accountant I've built my experience working within the SaaS and digital technology industries, growing early-stage businesses from the inside. I help digital entrepreneurs understand their companies and ensure they have all the tools they require to succeed and thrive. I love adopting new tech solutions and making use of these to increase efficiency within our clients' businesses.