Making the move to a limited company

A. The first key issue to look at is the amount of money you are taking out of the business at the moment. As a general rule of thumb, unless you are taking out significantly less than the profits of your business, incorporating is not going to give rise to a tax benefit. So for example, if your sole trade makes €60,000 a year but you need all of that €60,000 and intend to take it as salary in the new company, then incorporating will most likely not give rise to any tax advantage.

If however, you do not need all of your sole trades profit as salary, your next step is to consider if you would be happy to leave these profits to sit in a company or pension. Both of these moves could be tax advantageous however you will have somewhat limited your access to your funds.

Another crucial thing to bear in mind is the higher administration costs and burden of limited companies for example increased accountancy and professional fees. Depending on your situation, these may outweigh the benefits of a limited company.

In summary ask yourself;

• Does my sole trade make more than I need to live on i.e. are there profits left in the business?
• At this stage in my life do I need to have quick access to my money?
• Can I deal with the increased paperwork, deadlines and costs of having a limited company?

Date published 7 Sep 2018

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.