advice on setting up as Company or sole trader

You have decided to take control of your destiny and start up your own business. The route of self employment is a long and sometimes difficult one with a lot of benefits and potential pitfalls. Once you have decided upon what business you are going to run, you will have presumably loads of marketing ideas and financial aspirations and so forth. However the first practical step to starting up your business is to decide how the business will operate. The main choices are as a Sole Trader/Partnership or as an incorporated company. A sole trader and partnership are both similar in that the business is operated by the owners as self employed people in their own right. The main difference between sole traders and partnerships is whether there is one owner or more than one owner of the business. I am currently writing an in-depth article about the consequences of going into a partnership with someone. This current article is dealing with the fundamental choice of been self employed in your own right or in starting a company.
A company is a separate legal entity to the people who own it. It can trade, own and operate a bank account, be sued, liquidate (cease trading), etc on its own behalf. The big advantages of a company structure is that it offers limited liability and a low corporation tax rate. Limited liability means that a company can only be sued for whatever it owns itself so that the shareholders (owners) private assets are protected. Companies are taxed on their profits by way of corporation tax. The taxable profits are calculated after the director’s wages have been paid. In Ireland the current corporation tax rate is approximately a fifth of the marginal highest income tax rate. However in return for these benefit’s the administration and accounting requirements for a company are more stringent and involve a greater cost and consume more time than a sole trader's. Also any money that a director takes out of a company is taxed at income tax rates and therefore the corporation tax rate is only availed of if the company makes more money than the directors are paid as wages
A sole trader is a person who operates a business in their own right. As such they are solely the ones taking the risk of the business failing they are also the ones who benefit fully if the business is a success and makes a profit. A sole trader does not have limited liability and thus his/her own assets such as the family home can be under threat if the business is sued or it fails to pay all its creditors or debts. However a sole trader is a simpler way of running a business. The returns to the Revenue Commissioners are less arduous than the returns for a company. If the business has a small turnover with relatively low risk of been sued or if such risk can be insured against then this is a good choice. All the advantages and disadvantages of both options should be weighed against each other based on the specific business been proposed and then an informed decision made. The assistance of a trained professional advisor such as a solicitor or accountant is recommended to ensure the best outcome
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Frank McGivney & Co. Ltd Chartered Management Accountant fmcgivney@live.com
 Frank McGivney & Co. Chartered Management Accountants Kells, Co Meath