Lisa Lokasto

I thought I’d start off with the question new business owners ask me all the time…

“Should I incorporate or trade as a sole trader?”

It depends. I’m sorry… it does.

This is one of the most common questions when starting a business.. The choice between sole trader and limited company has important implications for tax, liability, administration, and how the business grows over time.

While there are other structures like partnerships and family partnerships, the vast majority of small businesses choose one of these two. The table below outlines the key differences to help you decide which structure is right for you

But First,  Here’s where I usually land on this, personally.

As a general rule, most small businesses are best starting out as a sole trader especially when profits are modest, and most of the income taken in drawings.

If drawings are close to profits, there’s little tax advantage to incorporating, and the extra cost and complexity often aren’t justified.

Incorporation becomes more worthwhile when turnover reaches around €100,000–€150,000+ and is growing, the business becomes more dynamic, and profits are reinvested rather than withdrawn. It also makes sense sooner if there’s higher risk, the need to raise funds, or a desire to build a more formal structure.

Feature	Sole Trader	Limited Company
Setup	Very easy. Register for income tax and trade in your own name or register a business name.	More complex. Register and incorporate a Limited Company with the Companies Registration Office (CRO) and update RBO (Register of Beneficial Ownership).
Cost	Lower setup and ongoing costs. Accounting and tax filings less complex.	Higher setup and ongoing costs. Accounts need to be prepared under a specific financial reporting framework; CRO filings, corporation tax returns, and personal tax returns are required.
Liability	Unlimited so personal assets are at risk. However, risks can be mitigated with business and public liability insurance.	Limited liability. The company is a separate legal entity. Personal assets are protected if the business fails (with certain exceptions)
Control	Full control. The owner can withdraw funds freely without running payroll.	Shareholders control the company. Directors (often the same person in small businesses) cannot take “drawings” and get be paid via payroll or dividends. This adds complexity and cost. There are further tax consequences for overdrawn directors accounts.
Taxation	Taxed on total profits at marginal personal tax rates (up to 52%), regardless of how much is withdrawn. Drawings are not deductible.	Corporation tax is 12.5% on company profits. Salaries paid to directors are deductible for the company. Directors/shareholders are taxed personally on salaries or dividends received.
Credibility	Arguably seen as less formal or established.	Considered more professional and credible by clients, banks, and investors.
Funding & Investment	Typically harder to raise investment.	Easier to attract investors and secure funding.
Privacy	Extracts of the accounts are filed with Revenue but not filed publicly.	Company financial statements are public (though abridged for small companies). Director remuneration is disclosed unless the company qualifies as a micro entity.
Admin burden	Simpler reporting and fewer filing obligations.	Heavy on the compliance: annual accounts, CRO filings, corporation and personal tax returns.
Profit Retention	All profits belong to the owner.	Profits belong to the company. Withdrawals have to follow legal and tax rules (salary/dividends).
Changing Structure	Can upgrade to a company structure later as the business grows.	Reverting from a company to a sole trader is more complex and less common.

Thanks for reading and if you need tailored advice, you know where to find me.

Lisa