Advice Needed - Is it worth setting up a Limited Company?

Hi Guys,

Here is my background:
I have a parttime hobby which makes me in the region of 450 - 800euro a month. I expect this amount will grow over the year. Unfortunately I've found out that this will be subject to 40% income tax

My question is as follows:
Is it worth setting up a limited company for my hobby to limit the amount of tax I pay? From my (limited)understanding I would be paying 20% tax as opposed to 40%. Apart from the initial setup cost and corporation tax, is there anything else I would have to pay?

Thanks in advance

Have you checked the existing threads on this issue? For example:

Key Posts and useful links for business

If this is a hobby I assume you have another full-time job? If so, then the amount you earn with your 'hobby' will be added on to your existing earnings and taxed at the relevant rate, regardless of whether you are a sole trader or a Ltd. Co.

In other words, if you are already earning up to (or over) the 20% bracket – €35,400 per year – then you will be taxed at 41% on the extra income regardless.

One advantage to having a Ltd. Co. is you can control how much of the extra earnings you pay yourself as an income, and therefore control the amount of tax you pay. However, if you are a one-man operation then this will be of little benefit as you will probably want to take out all earnings before year-end to avoid double-taxation (ie. paying Corporation Tax on profits and then paying Income Tax if you withdraw the money as income later on).

My advice would be to avoid setting-up a Ltd. Co. for a 'hobby' type income.

As suggested, read through the many other threads to get an idea of how this works.

Thanks for the replies. I will have to seek professional advice to see what the best thing to do is. It all sounds quiet complicated to me.

As an aside. I feel quiet bitter about the government taking half of my money when I'm trying to be entrepreneurial.. Why bother making any effort..

Hi all,
I am pretty much in the same situation as Daymoh. I am currently in the 41% tax baracket and run a small website that I expect to earn me €3000-€5000 this year.
I too am very frustrated and disillusioned by the fact the government penalise you for being entrepreneurial by slapping the standard PAYE tax rates on ones earnings.
I am currently operating as a sole trader and was wondering if is is possible for me to claim expenses such as website hosting, broadband, purchase of new laptop, mobile phone etc?
I read somewhere on this forum (i think) that it is easier and there are a much larger range of expenses one can claim if one operates as an LTD.....is this so? If so would this be a justifiable reason to set up an LTD...more expenses = less tax?
A friend of mine also operates a website and he mentioned the security of limited liability as another good reason to set up as an LTD....what are you opinions on this?

Thanks all for providing such informative content!

You can claim any legitimate expenses regardless of whether you are Sole Trader or Ltd. Co. For example... laptop, broadband, hosting, etc. are all perfectly fine expenses if they are used wholly and exclusively for the purposes of running your business. If they are used for both personal and business use then you will need to apportion a percentage to each and claim that way.

Forming a Ltd. Co. will allow you to claim extra expenses such as employees subsistence if you work away from your registered/normal place of work for more than 5 hours per day. However, I would speak to an accountant and seek professional advice before setting up a Ltd. Co. as there is a lot more paperwork and legalities involved that may render it unsuitable for many.

As for the security issue, unless you are exposing yourself to the possibility of huge loses then this doesn't necessarily become an issue. If your business is internet related (selling goods online?) then I can't imagine you being exposed to too much, unless you are planning on buying in massive amounts of expensive stock on credit. Also, I believe directors of a company can be held responsible for any debts arising out of negligence so the 'limited' part is not set in stone.

Thanks I will talk to an accountant,
Just to expand on my limited liabilty question...
I run an informative website (a lot smaller but not disimilar in style to askaboutmoney) and revenue is generated from advertising, I was just concerned at mitigating the risk of at some point the potential for there being incorrect information on my website (we're only human ) and someone potentiallly taking legal proceedings as a result. I have a lenghty disclaimer on my site am not 100% sure if that covers me..