Most businesses are set up as a sole trader, a partnership or a limited liability company.
A sole trader is the easiest, since it requires virtually no paperwork. You just decide to start in business – and, provided you register for any applicable taxes with the Revenue Commissioners within 30 days of starting – away you go! The downside is that there is no separation between you as a private individual and you as a business – so if the business cannot pay any debts it incurs, you have to do so out of your own pocket. Depending on the size and nature of your business, this may be too big a risk to take. Note that you can be a sole trader and employ people – the word ‘sole’ refers to the burden of risk, not the number of people involved in the business.
A partnership shares the risk of being in business between two or more people. It sounds like a good thing, to have someone to share the risk with – but sometimes it’s not, since you share the risks they create as well as offloading some of your own risk. Partners are jointly and severally liable for the debts of the partnership. Jointly means you are liable in proportion to your share in the business – a 30% share means you get 30% of the gains and 30% of the losses too. Severally means that each of the partners is individually liable for all the debts of the partnership – you might only have a 10% share but you’re still 100% liable (you can reclaim the 90% from your partners but only after you clear the debt). Choose your partners wisely!
A limited liability company allows you to restrict the liability that you bear for the debts of the business – the price you pay is registration (which leads to ongoing paperwork) and fees (initial and ongoing). The company is a legal entity in its own right, separate from its owners – so liability for the debts of the business lies with the business (unless you have been reckless or fraudulent). You can form a company yourself but most people do so through an agent – the cost varies but starts at just under €300, of which €100 is the registration fee and the rest is the agent’s fee. Once formed, a company is required to submit annual returns, including accounts, and to notify the Companies Registration Office of any changes to shareholders, directors (a company needs two – though this may change with the long-awaited, but still impending, Companies Bill), secretary, registered office, etc.