Setting up as a self-employed sole trader is the simplest and quickest way to start a business. There isn’t much paperwork to do. There are no registration fees to pay, but you must register with the Revenue Commissioners for tax and PRSI purposes.
Anyone can set up in business as a self-employed sole trader, although for certain types of work you may need a licence or permission from your local authority or county council. You will also need to live and have a PPS number in Ireland to be a sole trader in Ireland.
So what do you need to do to set up as a sole trader?
Here we answer your most common questions about setting up as a sole trader.
What Is The Difference Between A Company Name And A Business Name?
A company name is for limited companies and not sole traders. The company name creates a separate legal entity to those who own it. This is one of the main differences between setting up as a sole trader versus a limited company. When a company trades under a business name, it is known as their ‘trading name’. For example, Blue And Pink Baby Creations Limited trading as (t/a) Baby Store. The company will then put Baby Store on their shop front and marketing and Blue And Pink Baby Creations Limited t/a Baby Store on official company documentation such as invoices and contracts.
Sole traders can use a business name. You will need to register a business name if you wish to trade under a name that is different from your true name. Any individual, partnership or corporate body can register a business name. A sole trader can use a business name on their shop front and marketing activities.
Should I Be A Sole Trader Or Limited Company?
This decision is entirely up to you. There are pros and cons to both options and you need to weigh which one suits your business the best.
Setting up as a sole trader is relatively straightforward and is the quickest option when forming a business. However, becoming a sole trader can mean that you will miss out on the benefits of incorporating your business. The most popular reason to become a limited company is the attractive 12.5% corporation tax rate. Find out if you will pay less tax as a limited company and it might help you decide.
When Should I Make The Switch From Sole Trader To Limited Company?
There are a few reasons why a sole trader may decide to incorporate their business into a limited company.
Firstly, perhaps you are a contractor and your employer will only work with limited companies. We have had many startups come to us with urgent company formations for their business. This is because their employer has changed their policy on working with sole traders.
Secondly, perhaps you are growing and you are not able to take any more risks. Taking on risk as a sole trader is a personal risk. If there are any claims against your sole trade business, you are personally liable. When you set up as a limited company, you are creating a separate legal entity from yourself and any claims are made against the company and not you. However, there are some exceptions – for example, if you are seen to be trading recklessly.
Another reason why a sole trader may decide to incorporate their business would because you are looking for support or funding. Sometimes, organisatons may insist that you are a limited company before they are able to offer you any funding for your business.
How Do I Tell Revenue I Am Self-Employed?
Firstly, you need to have a PPS number to be a sole trader in Ireland. This is for tax purposes and you need to have a PPS number when you sign up on The Revenue Online System (ROS). This is where you will notify Revenue that you are a ‘self-employed person’.
What Do I Need To Do About Taxes?
As a self-employed person, you are required to self-assess your taxes and complete a Form 11. We can do this on your behalf and check that your filing is correct.
You or your accountant will assess the amount of Income Tax, Universal Social Charge (USC), Pay Related Social Insurance (PRSI) and Capital Gains Tax (CGT) you should pay in a year.
Your tax returns are due before 31st October each year. Your accountant will be looking for information such as bank statements, invoices and records in order to process your return.