Disclaimer. This post’s only intent is to share my personal experience with setting up a private limited company in Ireland. You should not take it as legal or tax advice and you should seek the advice of professionals if you are willing to build your company in Ireland. No warranties are given that my experience can apply to your project and no liability will be accepted.

What is a Private Limited Company (Ltd.) ?

Private

Private as opposed to Public. A private limited company cannot sell shares on the stock market to raise capital. A private company can become public when it meets the adequate financial criteria.

Limited

Limited as in “liability limited by shares”. This aspect is maybe the most important part of what a Ltd. is.

A private limited company has shareholders who share the ownership of the company. Being a shareholder grants several privileges, among them:

A decision power: shareholders participate in business critical decisions and their decision power is proportional to their share
The ability to benefit from the company’s profit: when the company generates a profit, this profit can be re-distributed to shareholders in proportion to their share

However these privileges come with a liability: the shareholders are liable to the company with respect to the price that their share was set at when they joined the business. In other words, the shareholders owe to the company the money that was agreed that they’d put in the business in order to get their share of it.

But, most importantly, this liability is limited to their share amount. It means that, if the company goes bust and is owing money to creditors, shareholders are only liable for the price of their share (which was agreed when they joined) only. They do not owe anything else.

Limited liability offers great protection to shareholders. For instance, as long as they paid their share, their personal properties (house, cars, other businesses etc..) are not at risk if business goes bad. Sole traders (individuals who trade without a company) do not benefit from this protection whatsoever, the money owed by their business is directly owed by them as individuals.

Company

A company is a distinct entity than its owners. It has its own administrative existence: it has a date of birth, it pays its own taxes, and eventually it dies. A big part of managing a company is to keep up to date with the mandatory administrative tasks required by various state authorities.

This post will cover the steps, the benefits and costs of building a private limited company in Ireland and what are the mandatory administrative tasks that need to be performed while it is alive.

Why Ireland?

In my particular case, the main reason is that I live in Ireland. But, let’s face it, Ireland is notoriously known for its extremely low Corporation Tax Rate of 12.5% (see this ranking). It means that the profit generated by an Irish company (the money left from sales after paying for products and overhead) are taxed at 12.5%.

Apart from the tax aspects, the Irish administrative processes are fairly straightforward to understand for any English speaking person.

However you should have the three following caveats in mind:

In order to qualify to the 12.5% Corporate Tax rate, an Irish-incorporated company needs to prove that it is centrally controlled and managed in Ireland. The Revenue Comissioner is very strict when assessing this condition.
There is 20% Whitholding Tax on dividends in Ireland (there are some exceptions). It means that if your company was to pay you €1000 in dividends, you would receive €800 and €200 would be paid in tax. Hence, low Coporation Tax rate does not mean that you can easily benefit from your company’s profit.
There is a 30% Capital Gain Tax which applies if you decide to sell you shares of the business.

Again, given your particular situation, a professional will give you advice on these points.