Pros and Cons of setting up a limited company in Ireland

The pros outweigh the cons when it comes to setting up an Irish company. Benefits range from low bureaucracy and favourable taxation, to the quality of the workforce and ease of company formation. 

Here are the pros, the cons and potential legal challenges that can go along with your Irish company set up.

What are the benefits of setting up a company in Ireland?

There are several benefits to setting up a ltd company in Ireland, including:

1.  Limited liability

A ltd company will have at least one shareholder. Shareholders have limited liability for the debts of the company. This means that they will only be liable for the amount of money they have invested in the company and not for any other debts that the company may incur. The personal assets of shareholders will not be affected.

2.  Tax efficiency

Limited companies are taxed differently to sole traders and partnerships. They can claim certain expenses as tax-deductible and they may also benefit from lower rates of corporation tax.

3.  Separate legal entity 

As a separate legal entity, a ltd company can enter into contracts, sue and be sued in its own name. This gives the company a certain level of protection from the actions of its shareholders.

4.  Raising investment

Limited companies can raise investment by selling company shares to investors. This is more difficult for sole traders and other partnerships.

What are the disadvantages of setting up an Irish limited company?

There could also some disadvantages to setting up an Irish limited company. This is where you’ll need guidance from legal and financial experts. 

1.  Cost

Setting up and running a new Irish company could be more expensive than running a sole trader or partnership business. This is because you will need to file annual returns with the Companies Registration Office and you may need to appoint a professional accountant to prepare your accounts. 

2.  Complexity

Limited companies are more complex to set up and run than sole trader or partnership businesses. This is because there are more rules and regulations that you need to comply with.

3.  Responsibility

As a director of a limited company, you will have certain legal duties. This includes filing annual returns and ensuring that the company complies with all relevant legislation. You will also need legal advice on issues ranging from contracts with employees and suppliers to shareholder and boardroom disputes. 

Other responsibilities include filing annual reports on time. The company secretary will work with your accountant to guarantee that your financial statements are submitted on time and you avoid any hefty fines.

4.  Public information

Limited companies are required to file certain information with the Companies Registration Office, which is then available to the public. This includes the names of the shareholders and directors, as well as the company’s financial information.

What exactly is a limited company?

A limited company is a type of business structure in Ireland. It is a separate legal entity from its shareholders, meaning that it can enter into contracts, sue and be sued in its own name. Limited companies are owned by shareholders, who each have limited liability for the company’s debts. This means that if the company gets into financial difficulty, the shareholders will only be liable for the amount of money they have invested in the company.

A private limited company is a business that is owned privately by a group of individuals. A public limited company is owned by the general public.

A public company’s stock can be freely sold and traded to the general public, allowing investors to sell their holdings on a stock exchange.

How to set up an Irish limited company In Ireland

There are a few steps you need to take in order to set up a private ltd company in Ireland.

  1. First, you need to choose a company name. This name must end with “Limited” or “Teoranta”. Proposed company names must be checked and accepted by the companies registration office. So choose your company name wisely.
  2. You then need to appoint at least one director or a number of company directors. These people must be over 18 years of age and cannot be going through an undischarged bankruptcy.
  3. If you are the only director, you will also need to appoint a separate company secretary. This person can also be one of the directors, but must be over 18 years of age. The company secretary ensures that the business fulfills its statutory obligations.
  4. You will need to have a registered office address in Ireland that acts as your trading address. This is where all official correspondence from the company will be sent. If you are a resident in Ireland you can use your home address. 
  5.   You will need to prepare and file certain company documents with the Companies Registration Office. These include the Constitution, which set out the rules for running the company, and the Form A1, which is the application to register the company.
  6. Once you have registered your company, you should obtain a Tax Registration Number (TRN) from Revenue. 
  7. You will also need to open a business bank account in the name of your limited company and ideally using your Irish business address.
  8. Shareholders will need to issue shares and detail each shareholders’ Full name; usual residential address and amount of shares that are proposed to be held in the shareholders name.

The Authorised Share Capital of a company is the amount of shares a company can dispense if required. The Issued Share Capital is the number of shares that have been allotted and paid for by the shareholders.

When entering into partnership with other shareholders, you should seek legal advice to protect your shareholder rights. This is important further down the line should the business be sold. 

Releasing Shares

The distribution of shares determines the ownership of the company. Shares can be issued at the time of company setup and can also be transferred, bought and sold at a later stage

How long does it take to set up a company in Ireland?

The whole process of setting up a limited company in Ireland can take around two weeks.

The average time it takes for the Companies Registration Office (CRO) to process an application to establish a business in Ireland is 10-15 days.

Company directors and the barriers to setting up a corporate entity in Ireland?

During the company setup process there are a few things to consider, particularly with regard to the proposed directors.

You may be a single director company (set up with only one director) or have multiple company directors.

Limited private companies in Ireland must have at least one EEA resident director (someone who is a resident of the European Economic Area).

It is possible to have non-resident directors to set up a company in Ireland, however the None-EEA resident director would need to purchase a Section 137 Bond.

The bond protects the business against violations of the Companies Act 2014. It also removes the requirement that an EEA-resident director must be present.

In some cases, if the business can show that it has a real and continuous link with one or more economic activities in Ireland, it may be relieved of the need for a resident director. For example the company may already be trading with other Irish businesses and customers or have employees in the country.

This is unlikely to apply to a newly formed private company.

What are the alternatives to a private limited company in Ireland?

A Designated Activity Company (DAC) – (limited by shares).

The members’ personal liability is restricted to the amount, if any, unpaid on their shares if the firm is dissolved. The maximum number of members is 149. A DAC company must have at least two directors. A memorandum and articles of association are included in the constitution. The stated goals will be included in the memorandum.

A Designated Activity Company Limited by Guarantee (DAC) – (limited by guarantee)

The members are liable under two headings: first, the amount, if any, that is unpaid on the shares they own; and secondly, the amount they have committed to contribute to the company’s assets in the case of a winding up. There must be at least two directors in a DAC firm. A memorandum and articles of association must be included in the constitution.

A Company Limited by Guarantee (CLG) (limited by guarantee not having a share capital)

The members’ liability is limited to the amount they have agreed to put up in the company’s assets in the case of a winding down, not exceeding the amount specified in the memorandum. Because CLG does not have a share capital, members are not required to purchase any shares in it.

A Public Limited Company (PLC):

Members’ liabilities are limited to the value of any shares they do not pay for. It should be mentioned that, in compliance with the Companies Act 2014, only a prospectus is allowed. The nominal value of the company’s authorized share capital must not be less than €25,000 and at least 25% must be paid up.

For more advice on setting up a company in Ireland, your statutory obligations and the potential legal hurdles, speak to Milan and the team now.

Article by: Milan Schuster