A Limited Company (LTD) is one of the most common types of business structures in Ireland. 88% of all businesses in the country are LTDs according to the latest Company Registration Office data.

LTDs benefit from limited liability, which means company directors and shareholders are generally only liable for the amount they have invested in the business.

Companies in Ireland are classed as separate legal entities, which means they can take out loans, enter contracts and be sued.

Limited Company Advantages

“There is far less risk involved with a Limited Company as you are not held personally liable for the debts of the company,” notes Larissa Feeney, founder and CEO of Accountant Online. “If you are a sole trader, you are held personally liable for all of the debts of your business. If a sole trader falls behind on debt payments, their personal vehicles or even you’re their home might be at risk.”

If you plan on seeking funding for your business, certain grants are only open to LTDs and not sole traders. LTDs also have a tax advantage. With a sole trader, all of your profits are subject to the PAYE tax rate of 20% to 40% whereas most LTD companies are only taxed the 12.5% corporation tax rate.

In Association with

There are also some government reliefs available for start-ups, meaning you may be exempt from paying corporation tax for up to three years. However there are a number of conditions that need to be met.

According to Feeney: “Setting up an LTD also gives you the flexibility to claim expenses, mainly with your salary. As a sole trader, your full residual profit is taken as a salary whereas this can be expensed when working within an LTD. As an employee of your own LTD company you can also claim the home working allowance of €3.20 per day if working from home.”

Limited Company Disadvantages

The initial setup costs of registering a Limited Company when compared to setting up as a sole trader are much higher. Registering a company costs around €200 with an agency or accounting firm, but there are also additional obligations for filing director returns each year, in addition to company filings and tax filings which can cost around €2,000 per annum.

It is also a more serious legal undertaking, because your obligations as a director mean that you need to have awareness of compliance and fiduciary duties and adhere to the Companies Act 2014 when setting up, running and closing down your company.

Larissa Feeney also notes that a Limited Company must submit annual accounts to the CRO which are publicly available. For micro firms, information that has to be made available in such filings is limited, but for larger firms there is visibility on profits, totals for cash, creditors and debtors, and directors’ remuneration.

All this information can be access online by anyone for a fee of €15.

Larissa Feeney notes that if Limited Company accounts are not submitted to the CRO or fail to comply with the requirements, penalties may be incurred, including the loss of audit exemption which leads to more expensive accounting fees. 

How do you set up a Limited Company?

Appoint at least one director and a company secretary
There has to be at least one director.  The director manages the company on behalf of its shareholders and usually in a start-up the directors and the shareholders are the same people.

If you only have one director, you’ll need to designate a separate company secretary. The company secretary's main duty is to file annual returns each year and work with your accountant to ensure your financial statements are filed on time.

Appoint at least one shareholder and decide how to divide up company shares
Shareholders are the owners of the company. “Think of shares as pieces of the company you can give away,” Feeney explains. “This division of shares determines the legal ownership of the company.”

There are two different types of shares required when setting up a company: Authorised Shares and Issued Shares. Authorised Shares are like an aspirational amount of shares that you can issue, now or in the future. Authorised shares have no monetary value and do not affect the value of the company. 

Issued Shares are the number of shares that have been allocated and paid for by shareholders. For instance, a company can have 100 issued shares, and if you issue those 100 shares to one shareholder then that one shareholder will have 100% ownership of the company. The number of shares that you issue determines who owns the Limited Company.

“We recommend having 100,000 Authorised shares and issuing 100 shares of €1 in value,” says Feeney

Choose the Company Name
The company name must be unique, distinguishable against other names previously registered in Ireland and follow the relevant guidelines. The Companies Registration Office carry out name checks based on these guidelines and if the chosen name isn’t deemed different enough, your submission will be returned and the company formation process will be delayed. 

Decide on a Registered Address and a Business Address
The registered office address and the business address are slightly different.  A registered address is the official, legal address of the company. This must be a physical location in Ireland, and it’s common for this address to be with your accountant because important notices will get sent here.

The business address is where your company’s business mail like invoices are sent. This is a separate entity from your trading address.

Feeney explains: “For example, you may not want to show your home address if you’re running an online business or working from home. In this scenario you can avail of a business correspondence address for your company, or a virtual office.”

Prepare and sign the Incorporation Documents
Once you have met the requirements above, you are now ready to incorporate your company. There are two options: 
- Set up a company online via Companies Online Registration Environment (CORE).
- Outsource to a company formation specialist. 

Photo: Larissa Feeney, CEO of Accountant Online.