Company Formation with Limited Liability

Company Formation with Limited Liability in Ireland

By Wiebke Wolter

Before starting your business in Ireland you have to decide what type of entity you require, i.e. whether you would like to trade as a Sole Trader/Partnership, Limited Company or Unlimited Company. A very important aspect influencing this decision is the one regarding the limitation of liability to the directors of the company.

What is limited liability?
In case of debt on insolvency, the liability of the shareholders is limited to the amount remaining unpaid on the shares hold by them. Hence the personal assets of directors and shareholders are not at risk where the company has been compliant. In case of insolvency the company assets are used to pay outstanding debt as much as possible.

Which advantages does limited liability have?
First of all by having a limited company you can enjoy peace of mind. With a Sole Trader / Partnership structure personal assets of the members are not protected in case of insolvency. You could lose all of your investment, but you won’t be held personally liable for the debt of the company.

Second, a limited company is a separate legal entity trading on its own rights. The company is not affected by the death of a director or shareholder. Contracts and lawsuits refer to the company, not the directors or shareholders as individuals, and the company name is protected against use by others.

Third, a limited company can carry financial advantages. The Corporation Tax at a rate of 12.5% is one of the lowest in the world. Limited companies enjoy higher business credibility. Furthermore they have additional finance options, which encourage their growth. They can sell new shares, access the Business Expansion Scheme, take grants, and are in comparison to Sole Traders/Partnerships more attractive to outside investors.