Last reviewed July 2026. General guidance, not personalised advice. The right structure depends on your circumstances — book a free consultation before deciding.

It's one of the most common questions we're asked: should I stay a sole trader, or set up a limited company? The honest answer is "it depends" — but here's what actually drives the decision.

How a sole trader is taxed

As a sole trader you're taxed personally on all your profits, whether you draw them or not. That means income tax at 20% up to the standard-rate band (€44,000 for a single person in 2026, higher for others), then 40% above it, plus USC and Class S PRSI (rising to 4.35% from October 2026). At the top, the combined marginal rate can reach around 52%.

How a limited company is taxed

A company is a separate legal entity. Trading profits are charged to corporation tax at 12.5%. Crucially, profits you leave in the company are only taxed at that 12.5% until you take them out.

A company doesn't avoid personal tax — it defers it on the profits you leave in the business.

You extract money as salary (a deductible company expense, taxed personally like any wage) and/or dividends (paid from after-tax profits, with 25% dividend withholding tax and then taxed at your marginal rate). Because dividends are taxed twice, salary is usually the more efficient route for owner-directors — but the mix depends on your situation.

The trade-offs beyond tax

  • Limited liability — a company ring-fences your personal assets; a sole trader is personally liable for business debts.
  • Admin and cost — a company means annual CRO filings, financial statements, corporation tax returns and payroll, so accountancy costs are higher. A sole trader files a single Form 11.
  • Audit exemption — available to small companies that file on time, but lost if you file late more than once in five years.
  • Privacy — company accounts and director details are public on the CRO register; a sole trader's finances stay private.
  • Credibility — some clients and suppliers prefer dealing with a limited company.

So when does incorporating make sense?

As a rule of thumb, it starts to pay off when your profits are consistently more than you need to draw for living costs — so you can retain earnings in the company at 12.5% rather than being taxed personally at up to 52%. Limited liability, plans to reinvest and grow, or pension funding through the company can also tip the balance.

If you draw most of your profit each year, or profits are modest, the extra admin and cost may outweigh the benefit. This is exactly the kind of decision worth a quick conversation — we're happy to run the numbers with you.

Sources: Revenue.ie (income tax, USC, corporation tax), CRO.ie (company filing and audit exemption) and PwC/KPMG Ireland tax summaries.