Setting up as a self employed Sole Trader

Setting up as a self-employed sole trader is the easiest and quickest way to start a business. There isn’t too much paperwork to do and there are no registration fees to pay. But, you must remember to register with the Revenue Commissioners for tax and PRSI purposes.

To set up as a sole trader in Ireland, you will need to be living in Ireland.

Here, we answer the most common questions about setting up as a sole trader.

Should I be a Sole Trader or Limited Company?

Choosing between becoming a Sole Trader or a Limited Company can be a difficult decision to make. There are pros and cons to both and you need to decide which one will suit your business needs 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 registering a company. The most popular perk to incorporating is the 12.5% Corporation Tax rate. Setting up as a Sole Trader also means accepting a risk to your personal assets if the business was to unsuccessful. You should therefore consider the level of risk when deciding your business structure.

What do I need to do about taxes?

Tax returns

As a self-employed person, you are required to prepare and file a tax return, a Form 11 each year. Your tax returns are due before the 31st of October each year for the year before, so the tax return for 2018 will be due by 31st October 2019.

Payable tax

You, or an accountant, will have to 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 so that you can put it aside through the year. You can also see our example tax calculation for a Limited Company and a Sole Trader to see if you will pay less tax as a Sole Trader or Limited Company.

What will I need to submit my tax returns?

In order to prepare your tax return you will need bank statements for the relevant period. For example if you are preparing the accounts for 2018 you will need bank statements for January to December 2018. You will also need a record of all of your purchases, sales and expenses for the same period and invoices to support those records. You can keep the record in an excel, or you can use accountancy software. Either way you need to keep your books in order. If you are not sure which software to choose you can check out our recommended accountancy software.

Why would I consider switching from a Sole Trader to a Limited Company?

Contractor

If you are a contractor you may have employers, or potential employers, who will only work with limited companies.

The business is growing

You might be growing and do not want to take any more risks. As a Sole Trader, any risk is a personal risk whereas as a Limited Company you are not personally liable as the company is a separate legal entity.

Protection of company name

As a limited company, your Company Name cannot be duplicated. As a Sole Trader you can register a business name, but this is not protected.

What is the difference between a company name and a business name?

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.

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.

A company name is for a limited company and not sole traders. The company name creates a separate legal entity to those who own it.

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.
This is one of the main differences between setting up as a sole trader versus a limited company.

If you're operating as a Sole Trader make sure you...

  • Keep good books and records.
  • Use Revenue's Online Service as a Self-Employed Person.
  • Register for VAT and tax.
  • Self assess your taxes before the October 31st deadline.

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