When setting up or scaling your fitness business in Ireland, one of the key decisions is choosing how to structure your business: Should you trade as a sole trader or set up a limited company?

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Your choice affects your tax, liability, professional image, and ability to grow. Below, we explore the pros and cons of both structures and introduce a key tax incentive that could tip the scales for small business owners: the Corporation Tax Exemption for New Start-Ups.

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Option 1: Sole Trader

✅ Pros:

1. Simple and Inexpensive to Start
   
    
   • Just register with Revenue and start trading.
 
2. Full Control
   
    
   • You keep all profits and make all decisions.
 
3. Lower Administrative Burden
   
    
   • No Companies Registration Office (CRO) filings or corporation tax returns.
   • Only required to file an annual Income Tax return
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❌ Cons

1. Unlimited Personal Liability
   
    
   • If something goes wrong, your personal assets (like your home or car) could be at risk.
 
2. Higher Personal Tax Rates
   
    
   • Income can be taxed up to 52% once you cross certain thresholds.
 
3. Less tax efficient for pension payments
   
    
   • While you can claim tax relief on pension contributions at your marginal income tax rate (20% or 40%), USC and PRSI (up to 12% combined) are not refundable. In contrast, limited companies can contribute directly to a pension scheme, which is a fully deductible business expense with no PRSI/USC.
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Option 2: Limited Company

✅ Pros

1. Limited Liability
   
    
   • Your personal assets are protected if the business runs into financial trouble.
 
2. Lower Corporation Tax Rate
   
    
   • Company profits are taxed at 12.5% versus up to 52% personal tax as a sole trader.
 
3. Small Company Corporation Tax Relief
   
    
   • New limited companies may qualify for full or partial exemption from Corporation Tax for the first three years, under Section 486C of the Taxes Consolidation Act.
      
     • This relief applies on trading profits.
      
     • Full exemption is available where corporation tax liability does not exceed €40,000.
      
     • The relief is restricted to the amount of Employer PRSI paid in the year.
4. Tax efficient pension payment
   
    
   • The company can make employer contributions to a pension scheme on your behalf.  These contributions are fully tax-deductible for the company and are not subject to PAYE, PRSI or USC for director/employee.
5. Flexible Tax Planning
   
    
   • Pay yourself a salary or retain profits in the business for reinvestment
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❌ Cons:

1. More Admin
   
    
   • You must register with the CRO, maintain company records, and file annual returns.
2. Accountancy Fees
   
    
   • Professional help is essential, which means higher annual costs.
 
3. Less Direct Access to Profits
   
    
   • Taking money out of the company must follow legal and tax-compliant procedures (salary, directors’ loans, etc.).

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�Which One Is Right for You?

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Freelance  or part-time PT - Sole Trader

Full-time coach or small gym owner earning €50k+ - Ltd Company

Planning to grow, hire staff, or raise investment - Ltd  Company

Low  income, testing an idea - Sole Trader (can switch later)

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Final Word: Talk to a Professional

While it’s tempting to focus on the cheapest or easiest setup, your business structure has long-term consequences. Speak with an accountant or tax advisor who understands the tax system and the fitness industry.

The right structure could save you thousands – and protect your personal assets while you build your business.

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Thinking of going limited?
We’ll help you figure out if incorporation and tax reliefs like the small company exemption are the right fit for your fitness business. Get in touch today for tailored advice.

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