You have been trading a few years and profits look healthier than they used to. Someone, your accountant, a client, or another sole trader, has told you it is time to "go limited". That advice is common, and often right, but it is not automatic. A limited company pays a lower tax rate on its profits than you pay on your own income, but it also costs more to run and brings obligations a sole trader never faces. Here is when the switch actually pays off, what the conversion involves, and what changes day to day.
In short
Three signs it might be time to switch
The clearest signal is the gap between what your sole trade earns and what you actually draw to live on. As a sole trader, every euro of profit is taxed as personal income: 20% up to €44,000 for a single person and 40% above that, plus PRSI Class S at 4.2% (rising to 4.35% from 1 October 2026, minimum annual charge €650). A limited company pays Corporation Tax at 12.5% on trading income, but only on profit you actually leave inside it. If you draw out most of what the business earns anyway, incorporating saves you little, because you still pay income tax and PRSI on that salary.
The second signal is liability. A sole trader is personally on the hook for business debts. A limited company is a separate legal entity, so your house and savings sit behind a layer of protection a sole trade does not offer.
The third signal is who buys from you. Some corporate clients and public bodies prefer, or require, a limited company rather than an individual. Losing work over your structure is worth listening to. A growing profit also opens pension planning options that are harder to use as a sole trader, though this depends on your numbers and is worth working through properly. If this pattern sounds familiar, it is worth talking it through before you file anything.
What changes once you are a director
Incorporating changes your relationship with the money the business makes. As a sole trader, the profit is yours the moment it lands. As a director, the company owns the profit and pays you a salary through payroll. Revenue is specific here: a company must register as an employer and operate PAYE on a director's income even with no other employees. There is no way around running payroll once you incorporate, even as a one person company.
The filing calendar also gets heavier. A limited company files and pays Corporation Tax (CT1) within nine months of its accounting period end, by the 23rd of that ninth month if filing through ROS. Its first annual return (B1) is due exactly six months after incorporation and, unlike later returns, does not require financial statements. Beneficial ownership must be registered with the RBO within five months of incorporation. None of this applies to a sole trader, who files one Form 11 a year.
Converting the sole trade into a limited company
The conversion is a company formation, not a rebrand of your existing business. You incorporate a new LTD, a private company limited by shares, by filing Form A1 online through the CRO's CORE system, at a cost of €50. If you will be the sole director, the company still needs a separate person registered as company secretary, since a single director cannot also act as secretary.
Once the company exists, you register it for tax with Revenue, at minimum for Corporation Tax and as an employer for PAYE. Then you transfer the trade itself: contracts, assets, and client relationships move from you personally to the new company, ideally with a clean cut-off date rather than a gradual handover.
New VAT registration and closing the sole trade
One detail catches people out every time: your sole trader VAT number does not transfer to the company. The company is a different legal person, so once it trades above the VAT thresholds (€42,500 for services, €85,000 for goods), it needs its own, new VAT registration, choosing between Domestic-only or Intra-EU. You cannot keep invoicing under your old number once the company takes over.
At the same time, close out the sole trade with Revenue rather than leaving it dormant, including a final Form 11 as a sole trader. For 2026, the standard Form 11 deadline is 31 October, extended to 18 November if you pay and file through ROS. Leaving the old registration open after the company takes over is one of the most common paperwork gaps we see.
What this means in practice
Take a sole trader with profit around €90,000 a year who only draws €50,000 to live on. As a sole trader, the full €90,000 is taxed as personal income and PRSI Class S, regardless of what is spent or saved. As a limited company, the director draws a €50,000 salary, taxed through PAYE as normal, and the remaining profit stays inside the company, taxed at 12.5% instead of the higher personal rate. The company can then use that retained profit for investment, a pension contribution, or simply a buffer, without it first passing through income tax at 40%. This is where incorporating tends to earn its keep: not by changing the tax on money you spend, but on money you do not need yet.
Common mistakes
Next steps
Whether, and when, to convert from sole trader to limited company depends on your actual numbers, not a rule of thumb. If you want help working out whether incorporating makes sense for you, and handling the conversion itself if it does, we're here. Get in touch.