3 Compelling Reasons to Convert Your Business from Sole Trader to Limited Company
As a Sole Trader you are your business. You are personally liable for the debts of your business. This means that should your business fail your personal assets such as your home and your car can be used to pay off your potential creditors. By setting up a Limited Company you are limiting your liability, essentially creating a safety barrier between you and your business. Your business will become a separate legal entity, and potential creditors can only get access to the assets of the company, not your personal assets.
The Corporation Tax that a Limited Company pays in Ireland is only 12.5%. Sole Traders pay Income Tax at either 20% or 40%, add to that PRSI and USC (taxes by another name), and the actual marginal rate of tax can be as high as 52%! Yes you can actually end up handing over more than 50% of your hard-earned profits to the taxman!
The ultimate aim of any business owner should be to extract an income from their business so that they can enjoy the fruits of their labour. In very simple terms it is much easier to do this in a tax efficient manner (meaning you get more money in your pocket), when you operate your business as a Limited Company rather than as a Sole Trader.
To find out more about why you need to seriously consider moving your business from Sole Trader to Limited Company please feel free to contact me