Limited Companies FAQ

Confused about limited company structures? Read our FAQ below to find out everything you know about setting up a limited company so you can start your contracting journey.

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  1. Why Do Contractors Need A Limited Company Structure?
  2. What Are the Different Types of Umbrella Companies?
  3. What is a Personal Limited Company?
  4. What are the Key Differences Between Umbrella Companies & Personal Limited Companies?
  5. What Are My Insurance Responsibilities as a Contractor?
  6. Who Are Some Specialist Tax Accountants in Ireland?

Why Do Contractors Need A Limited Company Structure?

To get set up as a contractor, you will need a Limited Company structure. This will protect you personally in case something goes wrong. Any risk is attached to the company and the company can only pay what it owns – all your personal assets and money are protected.

What Are the Different Types of Umbrella Companies?

  • Director Umbrella Company

    With this option, the contractor becomes a Director of a Limited Company. This gives the contractor a self-employed status so they can pay the lower rate of PRSI (Class S) 4% and do not have to pay the employer’s portion of PRSI. This solution is a good choice for contractors who want to maximise their take-home pay. 

  • PAYE Umbrella Company

    This limited company structure enables the contractor to join the company as a PAYE member. This allows them to keep up their Class A PRSI contributions while on contract. The PAYE Umbrella Company will be responsible for deducting payroll taxes on behalf of the Contractor. This is an ideal solution for first-time contractors working on short-term contracts.

What is a Personal Limited Company?

Personal Limited Companies (PLCs) offer contractors an alternative solution to Umbrella Companies. With a Personal Limited Company, the contractor fully owns the company. The aim of the PLC is to act as a separate legal entity; giving the contractor legal protection against any personal liability while contracting. To get the most out of your PLC and to ensure full tax-compliance, you will need to hire the services of a specialist accountant. As a contractor, your income will come from taking salary payments from the company.

PLCs typically require more paperwork and money to set up, however, they are the most tax-efficient solution. As such, they are a good choice for long-term or career contractors.

  • Employ staff or sub-contractors
  • Claim large business expenses
  • Start a pension plan
  • Purchase company assets e.g. a company car

What are the Key Differences Between Umbrella Companies and Personal Limited Companies?

  • Umbrella Company
  • A separate legal entity that protects the contractor against any personal liability while contracting
  • Can be set up quickly & easily by specialist tax accountants
  • The contractor is an employee or a director of the Umbrella Company
  • Ideal for managing short-term contracts
  • A good choice for first-time contractors
  • The contractor can hire a specialist accounting firm will manage accounting, payroll & admin
  • The contractor submits a timesheet to the company and receives their income as a salary based on the hours worked
  • Personal Limited Company
  • A separate legal entity that protects the contractor against any personal liability while contracting
  • Can be set up quickly & easily by specialist tax accountants
  • The contractor owns the company
  • Most tax-efficient solution for long-term/career contractors
  • A good choice for first-time contractors
  • The contractor can hire a specialist accounting firm will manage accounting, payroll & admin
  • The contractor can manage their own salary payments

Whereas Umbrella Companies are an ideal fit for those who are new to contracting, Personal Limited Companies are better suited to long-term contractors. Watch our webinar to learn more about making the switch from an umbrella company to a personal limited company.

What Are My Insurance Responsibilities as a Contractor?

When setting up a limited company structure – be it an Umbrella Company or a Personal Limited Company – you are legally obliged to obtain insurance. There are three different kinds of insurance that you will need to get: 

  • Professional Indemnity

    This is designed to protect business owners, freelancers and the self-employed if clients claim that a service is unsatisfactory.

  • Employer’s Liability

    These policies insure against liability and costs in the event that an employee makes a personal injury claim during the course of their employment.

  • Public Liability Insurance

    These policies provide cover for you if a member of the public makes a personal injury claim against your business following an accident that took place during the period of your policy.

Many tax firms include insurance as part of their limited company service packages, so you will not have to worry about purchasing a policy yourself. What’s more, in many cases insurance can be offset as a business expense.

Depending on your needs, you may also wish to look into Key Person Insurance, Business Interruption Cover, Partnership Cover, and Co-director Insurance. To learn more about these, get in touch with a qualified insurance broker.

Who Are Some Specialist Tax Accountants in Ireland?

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