Sole traders / farmers
A sole trader is the simplest form of business in Ireland. The majority of businesses, including most farmers, use this format. As the name implies, it refers to one individual who owns and operates a business. A sole trader can have employees to assist with the running of the business, but it is the sole trader who owns the business, taking all the risks and rewards. A sole trader’s business is part of his personal property and the business debts and liabilities are also the trader’s own personal liabilities. Any creditors of a sole trader have recourse directly against that sole trader and his assets.
A typical partnership consists of a group of individuals carrying on business in common with a view to making a profit. The number of partners can vary between a minimum of two persons and a maximum of twenty partners. The partnership entity does not have a legal personality separate from
that of its partners. Prior to establishing a partnership, the partners should enter into a legal partnership agreement as this can avoid costly legal disputes in the event of the partnership ceasing .There are special tax rules that dictate how the profits/losses and capital allowances of a partnership are taxed.
An Irish private company is incorporated in accordance with the provisions of the Companies Acts, 1963 to 2012 which requires more formality and expense than a sole trader or partnership. A company differs from a sole trade or partnership in that it is a separate legal entity distinct from its members (shareholders). The assets of a company do not belong to the members. Instead they are registered in the name of the company as separate legal entity. A company pays corporation tax on its retained profit and normally the promoters of the company are paid a salary which is subject to PAYE.
Each of the above business formats has different tax and legal liability implications for the promoters of a business. Limited companies also have certain disclosure requirements. John E Hughes & Co will discuss each client’s specific requirements and provide advice as to how best a business should be structured.