The choice between working as a sole trader and setting up a limited company comes down to three things: personal risk, tax, and paperwork. A sole trader is simple and cheap to run but carries the business’s debts personally. A company protects your personal assets and pays a low rate of corporation tax on trading profits, but comes with more rules and annual filings. This guide compares the two side by side for Ireland.
Key facts
- Sole trader: you and the business are the same legal person. Profits are taxed as your personal income.
- Limited company: a separate legal entity. Trading profits are taxed at 12.5% corporation tax, and money you take out is taxed again in your hands.
- Setting up a company costs €50 with the CRO, plus €20 a year for the annual return.
- A company needs a director, a separate secretary, an EEA resident director (or a €25,000 bond) and an Irish registered office.
- Sole traders register with Revenue on form TR1 and file an annual Form 11 under Pay and File.
Side by side comparison
| Sole trader | Limited company (LTD) | |
|---|---|---|
| Legal status | You are the business | Separate legal entity |
| Liability for debts | Personal, unlimited | Generally limited to the company’s assets |
| Tax on profits | Income tax, USC and PRSI on all profits | 12.5% corporation tax on trading profits, 25% on non-trading income |
| Taking money out | Profits are yours | Salary or dividends, taxed again personally |
| Registration | Revenue form TR1, plus a business name if not trading under your own name | CRO form A1 (€50), then Revenue form TR2 |
| Annual filings | Form 11 tax return | Corporation tax return, CRO annual return (€20), financial statements |
| Officers | None | Director and separate company secretary |
| Privacy | Accounts are not public | Company details and annual returns are public |
Working as a sole trader
Most people start out as sole traders because it is the quickest way to begin. There is no company to form: you register for income tax self-assessment with Revenue on form TR1 and start trading. If you use a trading name other than your own, you also register it with the CRO for €20. Our guide on registering a business name covers that step.
Under self-assessment you file one return a year. The Pay and File deadline is 31 October in the year after the tax year. For the 2025 tax year, that is 31 October 2026, extended to 18 November 2026 if you pay and file online through ROS. At the same time you pay the balance of tax for the previous year and preliminary tax for the current year.
Advantages: simple to set up, low running costs, fewer filings, and your accounts stay private.
Disadvantages: you are personally liable for business debts, and all profits are taxed at your personal rates, which rise as profits grow.
Running a limited company
A company is a separate legal person. It owns its own assets, signs its own contracts and owes its own debts, which is why shareholders’ liability is generally limited. You form it with the CRO by filing form A1 and a constitution, for €50. Our step by step guide on how to set up a limited company in Ireland covers the whole process.
Companies pay corporation tax at 12.5% on trading income and 25% on non-trading income such as rent and investments. That lower rate is the main reason profitable businesses incorporate. But the money belongs to the company. When you pay yourself a salary or a dividend, that payment is taxed in your own hands.
A company also brings obligations: a separate company secretary, at least one EEA resident director (or a €25,000 bond), an Irish registered office, registration of beneficial owners within five months, an annual return to the CRO every year, and a corporation tax return to Revenue. Late annual returns attract fees starting at €120.
Advantages: limited liability, a lower tax rate on profits kept in the business, and often more credibility with larger customers, suppliers and lenders.
Disadvantages: more paperwork and running costs, public filings, and extracting money is taxed a second time.
Which is right for you?
There is no single profit level where a company always wins, because it depends on how much you need to take out each year, your other income and your costs. As a general guide:
- A sole trader often suits people testing an idea, freelancers with modest profits, and anyone who wants minimal admin.
- A company often suits businesses with higher profits that can leave some money in the business, businesses with real financial risk (staff, premises, stock, large contracts), and anyone planning to bring in investors or partners.
Many people start as sole traders and incorporate later once profits grow. Because the numbers depend on your own circumstances, it is worth having an accountant run both scenarios before you decide.
Frequently asked questions
Is it cheaper to be a sole trader or a limited company in Ireland?
A sole trader is cheaper to set up and run. A company costs €50 to form and €20 a year for the annual return, plus usually higher accountancy fees. Whether a company saves tax depends on your profits and how much you take out.
What is the corporation tax rate in Ireland?
12.5% on trading income and 25% on non-trading income such as rental and investment income.
Can I switch from sole trader to limited company later?
Yes. Many businesses start as sole traders and incorporate later. You form a new company and move the business into it, so take advice on how to transfer assets and contracts.
Do sole traders need to register for VAT?
Only if their turnover passes the VAT thresholds, which are the same for sole traders and companies. See our guide to the VAT registration threshold in Ireland.
Is a sole trader personally liable for business debts?
Yes. A sole trader and the business are legally the same person, so business debts can be pursued against personal assets.
Related guides
- How to start a business in Ireland
- How to set up a limited company in Ireland
- How to register a business name in Ireland
- VAT registration threshold in Ireland
- Preliminary tax in Ireland explained
- CRO annual return: deadlines, fees and late filing
Sources
- Revenue: Corporation Tax and basis of charge
- Revenue: A guide to self-assessment
- Revenue: Filing your tax return
- CRO: Company fees
- CRO: Directors and secretaries
Checked against Revenue and CRO guidance in October 2026. This guide is general information, not tax or legal advice. For your own situation, speak to an accountant. More business guides and news in our Business section.
