There are pros and cons with both and which you choose will depend on your objectives. Have a read of our Sole Trader vs Limited Company post for a fuller discussion.

Tax used to be a real driving factor behind this decisions (LTD’s were tax advantaged) however, successive Budgets have aligned the treatment.

If you are planning to extract all the profit from the business each year, then the most tax efficient structure varies based on the level of profit.

If you are looking to grow your business, the liability protection and greater cash flow flexibility of a Limited Company tends to be of more importance. This is because a Limited Company’s profits are taxed at 12.5% whereas a Sole Trader is taxed on profit as income tax (which for higher revenues results in a higher tax rate, however the money is now yours, taxed). So, a Limited company therefore has more cash it can use to fund growth (assuming your effective personal tax rate is higher).

The last main consideration is subjective: certain businesses prefer to deal with Limited Companies. Being a Limited Company (and a VAT registered one to an extent) signals that your business is more professional and more likely to be a long-term partner.

• You are a Irish business and have made €75,000 of VATable sales in the last 12 calendar months
• You are a Irish business and exceed one of the distance selling thresholds in the last calendar year
• You are a non-Irish EU business and exceed the Irish distance selling threshold
• You are a non-Irish business you intend to sell goods from a warehouse in the Ireland (including dropshipping)

You have the option of registering voluntarily but this is rarely advantageous for ecommerce sellers. It does happen, however, typically only if one of your suppliers will only deal with VAT registered businesses.