Legal Forms of Business in Ireland 2026: Sole Trader vs LTD

Last reviewed: November 2026 · Reviewed by Stéphane Gombauld, tax expert, technologist and digital nomad

You want to run a freelance or startup business in Ireland and need the right structure. After this guide you will know how each form is taxed, when a company starts to pay off, and which rules trap owners who live abroad.

Ireland legal forms of business in 2026: the key figures

What changed for 2026

• Entrepreneur relief limit raised. Revised entrepreneur relief taxes qualifying business gains at 10%. The lifetime limit is €1.5 million for gains from 1 January 2026, up from €1 million. It matters when you sell your company later.
• Standard CGT rate cut. Budget 2027 lowers CGT from 33% to 31% for disposals on or after 7 October 2026.
• Start-up relief extended. Budget 2027 extends the corporation tax relief for certain start-up companies (section 486C TCA 1997) to 31 December 2030.
• Sole trader PRSI up. Class S PRSI went from 4.2% to 4.35% on 1 October 2026, so the 2026 blended rate is 4.2375%.

Is this guide for you?

Read on if you…

• are starting a freelance or consulting business in Ireland
• run a sole trade and wonder whether to incorporate
• live outside Ireland but want an Irish company

Probably not your case if you…

• are setting up a regulated fund or bank – that needs specialist legal advice
• sell occasionally as a hobby, with no trade to structure

What are your options for a business in Ireland?

Irish company law sits in the Companies Act 2014. The Companies Registration Office (CRO) registers companies. Here are the forms you will actually meet.

Sole trader

You trade in your own name. There is no separate legal person, so your liability is unlimited and your personal assets are on the line. You register with Revenue for income tax as a self-employed person. It is simple and cheap.

Partnership

Two or more people trade together. Each partner is taxed on their own share of the profit. Liability of general partners is unlimited. The partners' residence drives the tax outcome.

Private company limited by shares (LTD)

This is the default choice. Under section 17, a member's liability is limited to any amount unpaid on their shares, and an LTD has at most 149 members. Under section 128, a company needs at least one director.

Other company types

The CRO also registers other company types, including designated activity companies and public limited companies. They suit regulated, single-purpose or listed businesses. Rarely relevant for a freelancer.

Branch of a foreign company

A non-resident company that trades in Ireland through a branch or agency is taxed on that trade in Ireland. The branch is not a separate legal person.

Which structure fits your business? The comparison matrix

For rates, losses and dividend rules in depth, read our guide to corporate income tax in Ireland.

When does a company pay off for a freelancer?

Here's the catch with the 12.5% rate. It applies to trading income left in the company. When you take money out, you pay again. Salary carries income tax, USC and PRSI. Dividends carry income tax and USC, and the company withholds DWT at 25% at source.

Two more Irish rules bite:

• Close company surcharge. Most Irish companies are close companies, meaning five or fewer participators control them (s. 430 TCA 1997). Investment income left inside is hit by a 20% surcharge. A close service company pays 15% on one-half of its undistributed trading income.
• Passive income. Rent and investment income in a company is taxed at 25%, not 12.5%.

So a company mainly pays off when you leave profit in it to reinvest. If you need all the profit to live on, the extra layer of tax usually cancels the benefit. Add up accounting and filing costs too, and track your deductible business expenses either way.

Can you run an Irish company from abroad?

Legally, yes. Two rules matter.

The EEA director rule

Under section 137 of the Companies Act 2014, at least one director must be resident in an EEA state. The rule does not apply if the company holds a €25,000 bond in the prescribed form. The bond covers unpaid fines and penalties. Section 137 is also subject to a narrower exception in section 140. Alternate directors do not count. Failing the rule is a category 4 offence for the company and officers in default.

Where is the company resident?

A company incorporated in Ireland on or after 1 January 2015 is Irish tax resident unless a double tax treaty treats it as resident elsewhere. Older Irish companies joined that rule after a transition that ended on 31 December 2020. A foreign company centrally managed and controlled in Ireland is Irish resident too. Irish residence means corporation tax on worldwide profits.

The other side is your home country. If you run the company day to day from abroad, that country may apply its own residence or permanent establishment test. A permanent establishment is a taxable presence of the company abroad. Result: possible double taxation. Check treaty relief in our guide to Ireland's tax treaties.

Weighing Ireland against other jurisdictions? Heavnn's business setup service compares structures across countries.

How do you set up an Irish company?

1. Choose the company type and a name, and check availability with the CRO.
2. Prepare the constitution and the application form (Form A1) with directors and shareholders.
3. Meet the director rule: an EEA-resident director, or the €25,000 bond.
4. File with the CRO, normally online. Processing times move every week, so check the dates posted on the CRO homepage before you promise a start date to a client.
5. Register for tax with Revenue: corporation tax, plus VAT and employer registrations if needed.
6. File your beneficial owners with the Register of Beneficial Ownership, after registering as a portal user.
7. File annual returns. Companies file a corporation tax return (Form CT1) and an annual return with the CRO.

Common mistakes (and what they cost)

• Incorporating too early → you add accounting and filing costs and a second layer of tax on extraction, for little saving.
• No EEA-resident director and no bond → the company breaches section 137, a category 4 offence for the company and officers in default.
• Running the company from abroad → your home country may claim the company is resident or has a permanent establishment there, and tax its profits.
• Leaving investment cash in a service company → the close company surcharge adds 20% on undistributed investment income.
• Forgetting dividend withholding → the company must withhold 25% DWT on most distributions.

Frequently asked questions

What is the most common business structure in Ireland?

For one-person businesses, the sole trader is the simplest. For companies, the private company limited by shares (LTD) is the default. An LTD can have a single director, limits members' liability to any amount unpaid on their shares and pays 12.5% corporation tax on trading income. Freelancers who want limited liability usually choose it.

What is the corporation tax rate in Ireland in 2026?

Corporation tax is 12.5% on trading income. A 25% rate applies to income from an excepted trade and to non-trading income such as rental and investment income, according to Revenue. Profits are charged for an accounting period of up to 12 months. Close companies can face surcharges on undistributed income, and dividends paid out are subject to 25% withholding tax, so the headline rate is only part of the picture.

Can a non-resident set up a company in Ireland?

Yes, but section 137 of the Companies Act 2014 requires at least one EEA-resident director, unless the company holds a €25,000 bond in the prescribed form. A narrower exception exists under section 140. Also check whether running the company from abroad creates residence or a permanent establishment in your own country.

Is the 12.5% tax rate available to every company?

No. It applies to trading income. Rent, interest and other non-trading income are taxed at 25%. Close companies also face surcharges on certain undistributed income: 20% on investment income and 15% on half of a service company's undistributed trading income. Dividends paid out are subject to 25% withholding tax, with exceptions.

Do I need an accountant for an Irish company?

Hiring an accountant is not a legal requirement in itself. You must still keep proper books, file a corporation tax return (Form CT1) and file an annual return with the CRO. Most owners use an accountant because late or wrong filings cost more than the fee. Budget for it when you compare a company with a sole trade.

Should a freelancer use an LTD or a sole trade?

It depends on how much profit you leave in the company. A company defers tax on retained trading profit at 12.5%, but dividends then bear 25% withholding and income tax, and a close company surcharge can apply. If you spend all your profit, a sole trader is usually simpler. Model both on real numbers.

Related guides

• Corporate income tax in Ireland
• Business expenses in Ireland
• Ireland's international tax treaties
• Ireland tax landscape overview
• Business forms and independent professional statuses in Malta
• Legal forms of business in Austria
• All country tax guides

Sources

• Companies Act 2014, section 137 – Irish Statute Book
• Companies Act 2014, section 17 – Irish Statute Book
• Corporation Tax basis of charge – Revenue
• Company residency rules – Revenue
• Close companies, Tax and Duty Manual 13-01-01 – Revenue
• Dividend Withholding Tax – Revenue
• PRSI – Department of Social Protection
• Other USC rates (non-PAYE surcharge) – Revenue
• Companies Registration Office
• Budget 2027: Tax Policy Changes Summary – Department of Finance

This guide is general information, not personalised tax advice. See how we research and review.