Sole Trader or Limited Company??

Paul_085

I currently have a full time job (9-5) but am looking to setup a small business with myself as the only employee. Is it worth setting up as a sole trader or limited company? Income for the year would range from €10000 - €15000 after the first 3yrs...initial setup will take time and the plan is to balance the books during this setup phase.

duploelabs

Paul_085 wrote: »

I currently have a full time job (9-5) but am looking to setup a small business with myself as the only employee. Is it worth setting up as a sole trader or limited company? Income for the year would range from €10000 - €15000 after the first 3yrs...initial setup will take time and the plan is to balance the books during this setup phase.

If you looked in to the limitations of each then there would be no question that sole trader would be the way to go

thegolfer

Depending on what you provide, and what you want from the business, would dictate whether sole-trader or company route should be pursued.

Sole trader
Has lower compliance costs compared to a company, however all income most likely will be subject to your marginal rate of tax, and as you're already working 9-5, this would\might mean that all additional earnings are in the 49% tax bracket, being IT 40%, USC 5% and PRSI 4%.

If you intend to balance the books this may indicate that cash flow will be tight, and you could run into problems in your first year, come tax deadline, having to pay preliminary and current year tax, not to mention an effective 50% rate.

If you don't feel that the business will survive after 6 months, then sole.

Company
Has higher compliance costs, however lower tax rates at 12.5%, assuming not a professional service company, and also allows for some pension planning too.

You may not draw-down all the profits by way of salary from the company, thus you can allow a fund to build up, which can be used to build up the company further, as a company environment is the best place for financing, with 87.5% profits retained after tax.

Company also has limited liability, where as sole-trader you are exposed to being pursued in a personal capacity if something goes wrong.

Weigh up every option.
Paying for good advice annually goes a long way.
I have seen too many napkin businesses go south on the simple things.

pedroeibar1

If you usd the search function you would have found lots of suggestions including this one

Paul_085

Thanks for the information, this confirmed alot of what I was thinking. I already searched for similar scenarios however, couldn't find somebody who had gone through the process based on the same background as myself.