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When you start a business in Ireland you can trade as a sole trader, a partnership or a limited company. The choice affects your tax, your personal liability and your admin, so it is worth getting right from day one.
Sole trader
A sole trader is the simplest structure: you and the business are the same legal person. You keep all the profits, but you are personally liable for all the debts. You pay income tax (20% and 40%) plus PRSI and USC on your profits, and file an annual income tax return (Form 11).
Partnership
A partnership is two or more people running a business together. Each partner is taxed individually on their share of the profits, and each partner is personally liable for the partnership's debts. A written partnership agreement is strongly recommended.
Limited company
A limited company is a separate legal entity. Shareholders' liability is generally limited to the amount they invested, which protects personal assets. A company pays corporation tax at 12.5% on trading profits, while directors and employees pay income tax on their salaries. Companies have more compliance — annual accounts, corporation tax returns and CRO filings.
At a glance
| Sole trader | Partnership | Limited company | |
|---|---|---|---|
| Legal status | You are the business | Shared between partners | Separate legal entity |
| Liability | Unlimited (personal) | Unlimited (joint) | Limited to share capital |
| Tax | Income tax 20% / 40% | Each partner taxed individually | 12.5% corporation tax + income tax on salary |
| Filing | Form 11 annually | Form 11 each partner | CT1 + CRO annual return |
Which is right for you?
There is no single right answer — it depends on your profits, your plans, your risk appetite and whether you want to retain profits in the business. As a rough rule, incorporation often becomes attractive once profits are consistently high enough that you are paying the 40% rate.
Frequently asked questions
What is the main advantage of a limited company?
Limited liability and a lower tax rate on retained profits. Company trading profits are taxed at 12.5%, which can be much lower than the 40% income tax a sole trader pays.
Do I pay more tax as a sole trader?
Not necessarily at low profit levels, but once you are paying the 40% rate, a company can often be more tax-efficient because profits can be retained at 12.5%.
Can I change structure later?
Yes. Many businesses start as sole traders and later incorporate, but the timing and method matter for tax, so plan it with advice.
How do I decide?
Model the tax and consider your liability and growth plans. An accountant can run the numbers for your situation.
Choosing the right structure can save you a lot of money and protect your personal assets. If you are starting up or thinking of incorporating, talk to Bradán Accountants — we will help you pick the right structure for your plans.
Sources
- Revenue.ie – Business structures (sole trader, partnership, company)
- Companies Registration Office (CRO) – Registering a company
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