Company Formation

Benefits of a Company

Limited Liability

This is the main reason for operating through a limited liability company. Once the business is operated legally and in compliance with company law, the personal assets of the Directors and Shareholders are protected from the company’s creditors in the case of receivership or liquidation. Legally, a shareholder can only lose the amount of money they contributed to purchase their shares in the company. A sole trader or partnership does not have this protection – they are personally fully liable for the debts of the business in the case of failure.

Tax Efficiency

A limited liability company is subject to Corporation Tax of only 12.5% on its retained profits. Ireland has amongst the lowest rates worldwide and is far lower than the taxation payable by sole traders or partnerships, as they are taxable on their entire profits. Limited liability companies have additional scope in terms of pension schemes and benefit-in-kind items such as health insurance, life assurance etc. can be paid through the company. It’s possible to forward plan in relation to Director’s Salaries, Benefit-in-Kind issues etc. in order to reduce the Director’s personal taxation liability. This is of particular importance for entrepreneurs in a sole shareholder/manager position.

Separate Legal Entity

A limited liability company is a separate legal entity. This means that the company is distinct and separate from both its shareholders and management. This also means that the company can sue and be sued in its own name protecting its management and shareholders. The Companies Registration Office will not allow registration of two identical or similar company names. This protects the company’s corporate identity from theft.

Borrowing Flexibility & Continuity

In general, limited liability companies have an easier borrowing ability than sole traders or partnerships. They also have additional financing options such as issuing additional shares and accessing Business Expansion Scheme investment. The company will survive and continue to trade beyond the death, bankruptcy or resignation of any shareholders or management. Additional shareholders can easily be added. This gives investors security that company will keep going.

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IAI offers business advice on how to overcome challenges facing Small & Medium sized Enterprises(SMEs) across the country including: