Should an Irish Sole Trader Incorporate a Limited Company

Someone tells you to “go limited.” Maybe it’s your accountant, maybe it’s a contractor mate who swears a company slashed his tax bill. Now you’re staring at your Form 11, wondering if you’ve been overpaying for years. So you look up a formation package and see it costs less than a weekend away. The whole thing starts to feel like a no-brainer.

Then the reality arrives after you sign. You get a second tax calendar that runs apart from your self-assessment. You also get a CRO annual return that can get the company struck off the register if you leave it unfiled. You pay an accountancy bill that dwarfs your old one. The tax “saving” turns out to be money you’ll pay anyway the moment you draw it out. You’ve bought admin and cost, and the profit you live on is taxed just as hard as before.

The trick is knowing whether you are one of the people a company rewards, or one of those it quietly makes poorer. That turns on a single question: what, exactly, are you buying, and can you name it before you file the paperwork?

Reviewed 2026-10-29

How a Limited Company Differs from a Sole Trader

A private company limited by shares is a separate legal entity. It owns its own debts and pays corporation tax on its profits. A sole trader is legally the same as the owner and pays income tax on all business profit personally.

Three lenses tell these two legal shapes apart: separate legal personality, liability exposure, and the tax and reporting route your profits take. Each one becomes a decision point later in this guide.

Start with identity. Revenue treats a sole trader as a self-employed person who is personally responsible for the business’s taxes and duties. There is no separate entity behind the business. A company, by contrast, is a separate legal entity from the people who run or own it. Its profits stay distinct from their personal income. In law, you and your sole trade are the same person. A private company limited by shares is a second person that owns its own trade and profits before they reach you.

That separation drives liability. A company holds its own assets and debts. As the Companies Registration Office notes, creditors can usually claim against the company’s assets, not directly against members’ personal assets. Under the Companies Act 2014, a member’s liability is limited to any amount unpaid on their shares. A sole trader, by contrast, carries unlimited personal exposure.

The tax route follows the same logic. Sole-trader profit is simply your income, reported through the personal system on a Form 11, so you pay income tax. Company profit is taxed first at company level under corporation tax on a CT1, before any of it reaches you. That gap, and whether any client or contract you want requires a company, is what the rest of this guide puts to the test.

Incorporating creates a separate legal entity that needs upkeep for as long as it exists.

Your Company Becomes a Second Legal Person

When a sole trader incorporates, the business becomes a separate legal person. It has its own legal capacity, directors’ duties and tax registrations. The owner shifts from being the business to running and feeding a distinct entity.

The moment you form a company, the law makes something new. Under the Companies Act 2014, the people who sign the constitution become a body corporate with perpetual succession. That entity is a separate legal person, distinct from you. As a sole trader, you and your business are one. Incorporation splits them. The private company limited by shares is the standard Irish form. It gets legal capacity close to that of a real person, so it can own property and sign contracts. It can also be sued in its own name.

That capacity comes with upkeep. You now hold at least two roles: shareholder and director. The company also needs a secretary, who cannot be you if you are its only director. Directors’ duties attach to you personally. They carry ongoing obligations aimed at directors rather than at a “self-employed” person. You feed the entity with its own tax registrations too. A company registers separately with Revenue and gets its own tax reference number, distinct from your PPSN, using its CRO details. It then registers for corporation tax, VAT and PAYE as needed, on Form TR2 or online through a tax agent.

A simple test follows. If an invoice or payment sits in the company’s name and reference number, the company is acting. If it sits in your name and PPSN, you are. Keeping that line clean is the daily work of the second legal person you now maintain. It is also why a separate company bank account matters.

When Limited Liability Stops Protecting Your Home and Savings

Limited liability protects a director’s personal assets from ordinary company debts. But that shield fails where they sign personal guarantees or trade recklessly or fraudulently, and PAYE left unpaid on their own salary can come back to them. In those defined cases, their own assets are exposed.

The protection is real, but it hangs on your behaviour and your paperwork. Three triggers can puncture it. The first is contractual and wholly self-inflicted. A personal guarantee to a bank, a landlord, or a key supplier is a separate promise in your own name. It sidesteps the corporate veil not by a court order but by your own signature. When the company defaults, the creditor comes after you directly. A guarantee secured on your home puts the house itself in play. Treat any facility letter or lease that asks for one as the point where limited liability quietly ends for that debt.

The second trigger is how you act in insolvency. Under Section 610 of the Companies Act 2014, a director can be made personally liable, without limit, for all or part of the company’s debts. This applies to a director who traded recklessly, kept running up debts they knew or should have known the company could not pay, or traded to defraud creditors. Fraudulent trading also carries criminal consequences. The clear red flag is trading on past the point where real repayment is possible.

The third trigger is tax. Say the company deducts PAYE from your own salary but never pays it over. While you control more than 15% of the shares, Revenue gives you no credit for that tax, so you can end up paying it yourself. Professional indemnity insurance answers client claims, not these risks. Those are the real limits of limited liability.

How Company Profits Get Taxed Twice and When 12.5% Corporation Tax Still Wins

A sole trader pays income tax on all business profit at personal rates. A company pays corporation tax on the trading profit left after costs, including your salary. You then pay personal tax on any salary or dividend you draw, so a dividend is taxed twice and incorporation mainly defers rather than removes tax.

The triggers above were about debts. This is about the money itself. Where it gets taxed shifts the day you incorporate. As a sole trader you sit under a single layer. The whole trading profit is your income. It is charged to income tax, the Universal Social Charge and PRSI Class S in the same year, whether or not you draw it. Nothing sits between the profit and your personal assessment.

A company adds a first layer. Trading profits of an Irish resident company are chargeable to corporation tax at 12.5%. Only what you take out as salary or dividend triggers the personal layer on top. A director’s salary carries PAYE, USC and PRSI. The company deducts the salary as a cost, so that profit pays no corporation tax. If you are a Class S director, the company pays no employer PRSI on your salary either. Dividends are different. The company cannot deduct a dividend, so it comes out of profit that has already paid corporation tax. You then pay income tax at your marginal rate, USC and PRSI on the gross dividend. The company deducts dividend withholding tax at 25% before it pays you, and that counts as a credit against your bill. So profit you take as a dividend meets one charge on the way in and a second on the way out.

The trap is reading that as a saving. It is mostly deferral, not a discount. Profit you leave inside the company has paid corporation tax. But it still carries a latent personal charge that lands whenever you finally take it. If you need almost all the profit to live on each year, you extract it quickly. As salary it is taxed once at your marginal rate, the same as a sole trader. As a dividend it pays corporation tax first and your marginal rate on top, which costs more. Holding money back only helps where the money stays in the company.

Early on it can also squeeze cash flow while you are still building reserves. Payroll falls due from your first salary. A small new company pays no preliminary corporation tax in its first accounting period, so that payment usually lands in year two, on top of the first year’s bill.

Why Leaving Profits in Your Company Can Trigger the Close Company Surcharge

The close company surcharge is an extra corporation tax charge for closely held companies. It falls on investment or professional-service income that is not paid out within the allowed window. The charge penalises leaving profit parked in the company.

That latent personal charge is not the only cost of parking cash. A close company is one owned and run by a small number of participators. It faces a second layer of corporation tax when you leave certain profits undrawn. Irish law added it to stop owner-managers using the company as a shelter that puts off the personal charge for good.

Two sections do the work. Which one applies depends on where your profit comes from. Section 440 TCA 1997 targets undistributed investment and estate income, things like interest and rents rather than your trade. Section 441 TCA 1997 is the one many contractors meet. It catches undistributed professional service income, where professional fees are the company’s main income. Revenue counts engineers, computer programmers, architects and accountants as professions here. It does not generally count management consultancy, so ask your accountant whether your work is caught.

It works as a timing test. Revenue applies a surcharge of 20% on after-tax undistributed investment and estate income that you do not pay out within the permitted window. For a professional services company the Section 441 charge is 15% on half of the undistributed trading income. There is a de minimis amount of €2,000, below which neither surcharge applies. Section 434 TCA 1997 sets the distribution window at 18 months after the end of the accounting period. The clock runs from your own accounting period end rather than from the day you notice it. That means a year you have already closed off can still be inside the window. Pay the surchargeable slice out as a dividend before that window closes and the charge falls away, though the dividend is then taxed in your hands. A salary is not a distribution, so it does not count for this test. Leave it parked and the retention you thought was smart deferral turns into extra tax on money already taxed once.

Why Your Sole Trade Losses Get Stuck When You Incorporate

Unused sole-trader trading losses do not transfer into the new company, because incorporation is treated as ceasing the trade. Any relief not used against personal income or carried back before the change is lost for good.

Timing shaped the surcharge, and it shapes this too. The moment you move the business into a company, Revenue treats the sole trade as stopped for good. That is because a change of ownership counts as cessation. The company is a separate legal person running its own trade. So your personal loss pool does not travel with the assets.

To see why relief gets stranded, sort the three reliefs by who they belong to.

• Section 381 lets you set a current-year trading loss sideways against your other income for the same year.
• Section 382 carries an unused loss forward, but only against future profits of that same trade or profession carried on by you.
• Section 385 terminal loss relief carries a loss from your last 12 months of trading back against the same trade’s profits in the three years before cessation.

Each one is tied to your own income tax sum. Section 382 sets a loss only against later profits of the same trade carried on by you, so nothing carries the losses into the company’s corporation tax.

The trap is the carry-forward balance. Once you cease, you have no further personal profits from that trade to soak it up. A large section 382 balance then becomes trapped losses that simply expire. If you are sitting on unrelieved losses, the practical signal is to wait. Use them up as a sole trader before you flip the switch.

The traps you have just diagnosed do not disarm themselves. They stay contained only by the discipline of running the company day to day.

Why Most Owner Directors Stay on PRSI Class S and Fund a Pension Through the Company

Most owner-directors who control the company stay on the self-employed PRSI class rather than the employee class. So incorporating does not by itself widen social-welfare cover. It does open employer pension contributions as a tax-efficient extraction route.

First, official PRSI guidance treats certain company directors as self-employed contributors under Class S, the same as sole traders. Setting up a company does not, on its own, move you onto the employee class. Control decides it, not the company label.

The test is ownership. A director who owns or controls at least half of the company can be classed as a proprietary director on Class S. So if you set up a company and hold the controlling share, you usually carry your self-employed status straight across. Class A applies where the relationship is employee-like, under a contract of service with limited control. Borderline cases can ask the Department of Social Protection’s Scope Section for a determination before assuming a class. So can any director unsure which side they fall on. Write to them with your shareholding and the terms you actually work under. Then let the determination set your class, rather than your own reading of the ownership test.

The rate is the same either way you look at it. Class S runs at 4.2% of your reckonable income until 30 September 2026 and 4.35% from 1 October 2026, under the current PRSI roadmap. That means two rates apply inside the one tax year. There is also a minimum annual contribution of €650 and an income floor of €5,000. For a sole trader, reckonable income means profit after capital allowances, not turnover.

The real effect is a trade, not an upgrade. Class S builds a record towards the State Pension (Contributory). But it does not open the fuller employee benefit suite. Employee schemes such as auto-enrolment may not reach a controlling director on Class S. A company does help with pension extraction. It can make employer pension contributions, which a sole trader cannot access. Sole traders are limited to a personal pension or PRSA, and to an age-related percentage of earnings. Know the current limit before you plan around it. Finance Act 2024 capped employer contributions to a PRSA or PEPP at 100% of the director’s emoluments for the year of assessment from 1 January 2025. Anything above that is treated as a benefit in kind and is not deductible. Any guide still describing the January 2023 position, where those contributions were effectively unrestricted, is out of date. That extraction route, not wider social welfare cover, is the real gain.

What You File with the CRO Each Year and What Goes Public

An Irish private limited company must file an annual return with financial statements. It must also keep its registered office and director details on the public register. It avoids a statutory audit only if it meets the small-company size test and files on time.

The rhythm is annual and non-negotiable. Every Irish company must send an annual return on Form B1 to the CRO at least once each calendar year, whether trading or dormant, filed online. The annual return gives the public a yearly snapshot of the company, including your registered office, directors, secretary and issued share capital. You must attach your statutory financial statements too, unless you fall within an exempt category. Your Annual Return Date sets the whole cycle. Record it and set reminders weeks ahead.

What goes public is broader than most first-timers expect. The public register lists the registered office and the names and details of directors and officers. Anyone can search it. That includes your home address. Directors must give the CRO their usual residential address, and it goes on the public register. The exception is a personal safety exemption from the CRO, which needs a supporting statement from a Garda Chief Superintendent. The Government has consulted on letting directors publish a contact address instead. Until the law changes, your home address stays public.

The prize for discipline is audit exemption. A small Irish LTD keeps it only by meeting every one of these:

• You meet the small company criteria. That means at least two of the three size limits in the table below, in both the current and the preceding financial year. In your first financial year, that year alone counts.
• You are not in an excluded category and file your annual return and financial statements on time.

A micro company, which is what most readers of this guide will be, sits at the lower figures in that table.

Miss the deadline and the cost adds up, though the rule softened recently. Section 22 of the Companies (Corporate Governance, Enforcement and Regulatory Provisions) Act 2024 commenced on 16 July 2025. Since then, a first late annual return in a rolling five-year period no longer automatically costs a small or micro company its audit exemption. A second late return inside that five years does, for the following two years. So treat the Annual Return Date as a hard line.

Why CRO Strike-Off Hurts More Than a Revenue Surcharge

Missing CRO deadlines is riskier in kind than filing late with Revenue. That is because persistent non-filing can strike the company off the register and remove limited liability. A late self-assessment return mainly adds a surcharge to tax already owed.

The two failure modes differ in kind. A late Form 11 is a cost problem. Revenue applies a late filing surcharge worked out as a percentage of your tax bill for the year. It is 5 per cent of that tax, capped at €12,695, if you file within two months of the deadline. It is 10 per cent, capped at €63,485, beyond that. It is charged even if you paid the tax in full and on time, so a bigger tax bill means a bigger surcharge. Your legal existence is never in doubt. Next year you simply file on time again.

A missed CRO deadline runs on a different track. A late annual return brings a €100 late filing fee the day after the deadline, then €3 for every further day, capped at €1,200 per return. That comes on top of the standard €20 filing fee. Failing to file is also an offence by the company and every officer in default. Those late fees are not tax deductible. Ongoing non-filing can then lead to involuntary strike-off and dissolution after statutory notices and Gazette publication. Once dissolved, the company stops existing and its assets pass to the State, unless it is restored. Anyone who keeps the business going afterwards does so without limited liability. Directors in office when the strike-off notice went out can also face disqualification.

That is the core gap for a one-person business. The admin burden is heavier too, since the Annual Return Date and its filing window run apart from your Form 11 self-assessment cycle. You now track two calendars, not one. If you cannot reliably hit CRO filing windows, hold off incorporating until your admin is in place.

What Setting Up and Running a Limited Company Really Costs

The CRO’s fees for forming and maintaining a company are small. The real annual cost sits in accountancy, tax filing and company-secretarial or registered-office services. So build your budget around the recurring compliance, not the low incorporation fee.

Follow the money in two columns and the picture clears fast. The cheap part is the state charge itself, and it is small. The CRO fee for filing Form A1 online through CORE is €50, and the annual return that follows costs €20 a year. Registering a business name as a sole trader, if you trade under anything other than your own name, is €20 online. Everything that makes incorporation feel expensive sits above that line, in the professional and recurring services a company needs and a sole trade does not.

Split your budget into one-off setup and annual outlay, then place each cost line in the right column:

• One-off setup: the €50 CRO Form A1 fee, plus a formation package or accountant’s setup fee that covers the constitution, filing and first tax registrations. The professional fee comes on top of the €50 state charge, so get a quote before you commit.
• Annual running costs: this is where the real spend lives. You pay for an accountancy package that handles statutory accounts and the corporation tax return, company secretarial support, and a registered office address. These are often bundled with the annual return filing as one recurring fee.
• Conditional: a Section 137 bond premium. It applies only when no director is resident in the EEA and the company holds no CRO certificate of a real and continuous link with an economic activity in the State. The bond covers up to €25,000 of certain company fines and tax penalties and must run for at least two years. You pay a premium for it rather than the €25,000 itself. If one of your directors is EEA-resident, ignore this line.

Cloud accounting software is a bookkeeping cost you likely already carry as a sole trader, not a new company cost. So compare your current annual sole trader costs against the company’s recurring column. Delaying incorporation trims your annual outlay but does not hand you an automatic saving.

How to Move Your Sole Trade into a Company Without Losing Clients

Converting means forming a new company and ceasing the sole trade on a set date. You transfer the business as a going concern in exchange for shares. Then you formally novate client contracts and move your banking, so client relationships move cleanly into the company and the transfer can qualify for the reliefs below.

Treat this as swapping one entity for another under a live client relationship, not a fresh start. Order matters, because the company must be able to contract, invoice and take payment before anything client-facing moves. Work the handover in this sequence:

1. Incorporate first. Form the company at the CRO, register it with Revenue for its own taxes and open its bank account. Do all this before you touch contracts or billing, so a real legal entity is ready to take over.
2. Set a clean cessation date. Fix the date the sole trade stops and the company starts, so the two never overlap and Revenue sees a clear cut-over.
3. Transfer the business as a going concern for shares. Move all business assets except cash into the company, including goodwill, and take at least part of the payment in shares. Done for genuine commercial reasons, this can qualify for Section 600 incorporation relief, which defers the gain by reducing the base cost of those shares. Where the assets form an undertaking that can run on its own, the transfer can also fall outside VAT under Transfer of Business Relief. A written transfer of business assets such as goodwill, book debts or premises can also carry stamp duty at 7.5%, so get the transfer costed before you sign.
4. Novate the client contracts. Re-paper each engagement so the company is the named provider on record, instead of relying on a silent handover.
5. Switch banking and invoicing last. Route all future invoices and payments through the company bank account under the company’s own tax and VAT numbers. Keep the old account open briefly only for final reconciliations.

Migrate it cleanly like this and the whole business sits inside one entity. That is what makes it saleable later.

Knowing how to incorporate proves nothing about whether it pays. It only pays if the same profit leaves more in your hand than staying as you are.

Comparing €80k Take-Home as Sole Trader Versus Company

Comparing the same profit as a sole trader against a company salary shows the combined tax is the same once you draw everything out. So real gains appear only on profit retained or routed to pension.

Fix one number and hold it steady: €80,000 of net business profit. Keep the same expenses and the same drawings you need to live on. Run it through both structures, and the same taxes keep showing up under different labels.

As a sole trader, that €80,000 is charged in full to Income Tax, PRSI Class S and USC, whether or not you draw it all. That is because you are taxed on profit, not on withdrawals (Citizens Information on how business owners are taxed).

Through a company, the same profit splits across two layers. The company pays corporation tax on its profits. You also pay Income Tax, USC and PRSI on any salary or dividends you take out (Revenue guidance on dividend income). Employer PRSI is not an extra cost for most readers here. Because a proprietary director stays on Class S, the company pays no employer PRSI on their salary. That charge arrives only if you are a Class A director or you hire someone.

Now run the numbers. Take the whole €80,000 out as salary and the company has no profit left to tax, so corporation tax is nil. A proprietary director also claims the same personal and earned income credits a sole trader claims:

The columns agree to the euro. The company column also carries an accountancy bill the sole trader column does not. That is the whole argument in one table.

Change one assumption and the picture moves. Leave €20,000 in the company and pay yourself €60,000. Corporation tax on the retained slice is €2,500, your personal bill drops to about €15,075, and the year’s total falls to roughly €17,575 against the sole trader’s €25,021. That looks like €7,445 saved, and it is worth having. But €17,500 now sits in the company, still carrying a personal charge. Drawing it later at the same marginal rate costs more than you saved. If your work is mainly professional services and you leave it undistributed past the window, the Section 441 surcharge takes roughly €1,313 of it as well.

The discipline is to tag each line for what it is. Corporation tax on profit you extract straight away is a prepayment against your personal bill, not a saving. Real gains show up only where profit stays put, or where it goes into a pension rather than into your bank account. Extract everything and the two columns converge exactly. Retain on purpose, or fund a pension, and the gap becomes real.

Illustrative only: a single director on PRSI Class S with no other income or pension contributions, claiming the personal and earned income credits. At 2026 rates, income tax on €80,000 is 20% of the first €44,000 and 40% of the other €36,000. Take off the €2,000 personal and €2,000 earned income credits and €19,200 is left. USC is 0.5% up to €12,012, 2% up to €28,700, 3% up to €70,044 and 8% above, which comes to €2,430.62. PRSI Class S at 4.2375%, the 2026 rate blended from 4.2% and 4.35%, is €3,390. On the €60,000 salary the same steps give €11,200, €1,332.82 and €2,542.50. Corporation tax is 12.5% of the €20,000 left in the company. The €7,445 saving is worked from the unrounded totals of €25,020.62 and €17,575.32. Budget 2027 proposes a wider standard rate band, higher credits and a wider 2% USC band from 2027, subject to the Finance Bill. That would lower both columns by the same amount. Your own figures will differ, so check them with Revenue or your accountant.

A single comparison shows where the advantage lies. But one worked case is not a rule you can apply to your own situation.

Naming a Real Trigger Before You Incorporate

Stay a sole trader while you draw everything you earn and carry no serious third-party risk. Incorporate only when you can name what you are buying. That could be retained profit, real liability, a required company contract, an investor, or a SURE refund for a new business you start through a company.

The mechanics only pay off when you can name something concrete you are buying. Incorporation defers tax rather than discounting it. The 12.5% corporation tax rate beats your marginal income tax rate only on profit you leave inside the company. Every euro you draw back out is taxed again personally. So the real question is how you take money out. If you draw nearly everything you earn each year, tax alone is a weak reason, and you should stay a sole trader.

Run the go or no-go test by asking whether at least one of these is really present:

• Retained profit you can name and will leave in the business. Weigh it against the Section 441 surcharge on undistributed service-company income if your work is mainly professional services.
• Real liability a company can ring-fence. Remember that limited liability for shareholders of a private company limited by shares is only a partial shield, one that personal guarantees and director duties cut through.
• A contract, tender or framework that requires a company, or an investor or co-owner who must subscribe for shares.
• A SURE refund if you are leaving a PAYE job to start a new business through a new company, and you meet the PAYE income, full-time and share-subscription conditions. Moving your existing sole trade into a company does not qualify. The relief covers shares issued on or before 31 December 2026. Budget 2027 says the Government intends to extend it, subject to new EU state aid rules, so check whether that has happened before you plan around it.

If a trigger is present, do it properly.

Your Move from Considering to Deciding

The 12.5% corporation tax rate beats your marginal rate only on profit you leave inside the company. So the decision turns on how you take money out, not on the company label.

Start this week with the go or no-go trigger test. Write down whether you draw nearly everything you earn each year, and whether any single trigger is present, using the triggers above. If none of those is real, you have your answer, and you stay a sole trader.

If a trigger is present, run the €80k comparison on your own numbers within the next 30 days. Take your actual net profit and split it into the salary and dividends you need to live on, against the slice you would retain. Then tag each tax line as either a true added cost, such as employer PRSI if you would be a Class A director, or mere timing. This tells you whether the gap is real before you spend a cent on formation.

If you are carrying unrelieved trading losses, do not incorporate yet. Use your section 381 and section 382 relief as a sole trader first, because incorporation counts as cessation and strands that pool. Time the switch for after the losses are absorbed.

Once the numbers hold and the losses are cleared, incorporate properly inside 90 days. Claim Section 600 incorporation relief on the assets you transfer as a going concern. Open a company bank account from day one and novate your client contracts. Set employer pension as your main extraction route ahead of dividends. Then log your Annual Return Date and set reminders weeks ahead. That matters because a second late B1 in a rolling five-year period costs the audit exemption for the following two years.

Worked in this order, you convert a vague worry about tax into a dated decision with a paper trail. You incorporate only when the retained profit, liability cover, or contract you named puts more in your hand than staying as you are.

Frequently Asked Questions

Should I be a sole trader or set up a limited company in Ireland?

Stay a sole trader while you draw nearly everything you earn and carry no serious third-party risk. Incorporate when you can name what you are buying. That could be retained profit you will leave in the business, real liability from staff or premises, a contract that requires a company, an investor, or a SURE refund for a new business you start through a company. Moving an existing sole trade into a company does not qualify for SURE. Draw everything out as salary and the tax is identical either way.

What actually changes on the day I incorporate my Irish business?

The moment your company is registered, the Companies Act 2014 makes it a separate legal person with perpetual succession, distinct from you. You shift from being the business to running and feeding it. You hold at least two roles, shareholder and director, with directors’ duties attaching to you personally, and the company gets its own tax registrations and reference number.

What does unlimited liability really mean for an Irish sole trader?

As a sole trader you and your business are the same person, so limited liability’s shield does not apply to you. That protection belongs to a company’s shareholders and directors. Personal guarantees and reckless or fraudulent trading can puncture it, and PAYE the company deducts from your own salary but never pays over can come back to you. Revenue treats you as a self-employed person personally responsible for the business’s taxes and duties, with no separate entity behind the business, so you carry unlimited personal exposure.

What is the close company surcharge, and would it apply to me?

It is an additional corporation tax charge on undistributed investment or professional-service income in closely held companies, applied when that income is not paid out within the allowed distribution window. Section 441 TCA 1997 catches undistributed professional service income, such as fees for engineering, computer programming or accountancy. Revenue does not generally treat management consultancy as a profession, so check with your accountant. For a professional services company the Section 441 charge is 15% on half of the undistributed trading income.

How much does it cost to set up and run a limited company in Ireland each year?

The state fees are small: €50 to file Form A1 online with the CRO, then €20 a year for the annual return. The real recurring cost is the accountancy fee for statutory financial statements and the CT1 return, plus company secretarial and registered office services if you buy them. Get a quote before deciding, because that number drives the whole comparison.

Is 12.5 per cent corporation tax actually cheaper than income tax for a one-person business?

The 12.5% rate is cheaper only on profit you leave inside the company. It is mostly deferral, not a discount, since profit left inside still carries a latent personal charge that lands when you draw it. If you need almost all the profit to live on, salary is taxed at your marginal rate, the same as a sole trader. A dividend costs more, because corporation tax comes off first. Real gains show up only where profit stays put, or goes into a pension.

Does my Irish limited company have to be audited?

Not if it qualifies for audit exemption. It must be a small company. That means meeting at least two of three limits in both the current and preceding year, or in its first year alone. The limits are turnover of €15 million or less, a balance sheet of €7.5 million or less, and 50 or fewer employees. A micro company, with up to €900,000 turnover, a €450,000 balance sheet and 10 employees, sits well inside those limits. Stay outside the excluded categories and file on time. A first late return no longer costs the exemption, but a second inside five years does, for the following two years.

Does incorporating change my VAT registration threshold?

No. The VAT registration thresholds are the same for a company: €42,500 a year for services and €85,000 for goods. The company is a separate person, so it registers for VAT in its own right on Form TR2. It must register once its turnover passes a threshold, and it can elect to register earlier. It cannot use your sole trader VAT number. Transfer of Business Relief only covers a transfer to an accountable person, meaning one registered or required to register for VAT. So settle the company’s VAT position before the transfer date.