Limited Companies also pay corporation tax at 12.5% on trading profits, whereas Sole Trader or Partnership businesses pay income tax at multiples of that rate.

Operating as a Limited Company gives suppliers and customers a greater sense of confidence in a business.  Many larger organisations prefer to deal exclusively with legally incorporated businesses.

The formation of a Limited Company is also a low cost method of protecting a company name, in anticipation of the future growth of a new unincorporated business.

If a Limited Company becomes insolvent and is wound up, only the assets of the company are used to defray its liabilities.  The officers of the company have no personal liabilities (unless reckless trading was involved), and the shareholders are liable only to the extent of any unpaid shares held.

By contrast, if you trade as an individual, creditors or plaintiffs can claim on all of your personal property (other than the family home, unless it has been used to raise collateral),  in order to satisfy the debts, and if this is insufficient you may be declared bankrupt.

Limited Liability Company Summary

• The company has a legal existence separate from management and its members
• Members' liability is limited
• The company's name is protected - incorporation of a limited company protects it from use by another limited company
• It has flexible borrowing powers
• The company continues despite the death, resignation or bankruptcy of management and members
• The interests and obligations of management are defined
• Ireland's Corporate Tax Rate of 12.5% on trading profits is one of the lowest in the world
• New shareholders and investors can be easily assimilated
• Employees can acquire shares through tax-efficient retention schemes
• Appointment, retirement or removal of directors is straight forward
• Sole trader net profits are taxed as the proprietor's income, regardless of how much is undrawn or retained as working capital.  
• Directors' salaries and pension costs are tax-deductible expenses, before the company pays corporation tax on company profits
• Setting up a limited liability company offers just that - limited liability
• Shareholders in a limited liability company are only liable to lose the share capital they subscribe
• For sole traders and in partnerships, the individuals' personal assets are at risk if there is a claim against the organisation
• A company is a legal form of business organisation.  It is a separate legal entity and, therefore, is separate and distinct from those who run it. The company (and not the shareholders) is the appropriate person to be sued in the event that debts are incurred by the company which remain unpaid
• There is scope to build up greater pension benefits through a limited company
• A limited company has a greater ability to raise finance by the issue of shares
• Companies operating in relevant sectors can attract external investors under the EIIS.  This 4 year scheme allows investors to recoup 40% of the qualifying investment cost, in addition to receiving a return on their money
• Ownership of a limited company can be spread over a greater number of people
• The rights of shareholders are clearly defined and protected
  
• The company continues to trade, irrespective of director or management changes, until the company is wound up

Maximising the Tax Benefits of a Limited Company

Small businesses can minimise tax by:

• Ensuring that your company makes generous pension contributions
  
• Claiming the maximum possible expenses allowable under legislation
• Purchasing capital equipment with company rather than personal reserves 
• Ensuring that benefits in kind (insurance, health care, travel) are paid through a company
• Ensuring that other income streams are generated by the company and that expenses are allocated to that income
• Making tax-efficient dividend payments to its shareholders, and by the use of a company pension scheme

Raising finance

A limited company has an advantage of raising finance by selling issued shares to investors or by means of overdrafts, debentures and loans.

Continuity of Business

The resignation or death of  a company officer does not affect the structure of the company, which may continue to trade in perpetuity.  Any shares held by them may be sold or passed on through their estate.

Protecting your Irish Business Name

Registration legally protects the company name against anyone else forming a similarly named limited company either in sound or spelling.