Private Company Limited by Shares (LTD Company) — Private Limited Liability Company in Ireland

Key Characteristics:

1. Limited Liability: In a Private Company Limited by Shares (LTD), shareholders are only liable for the amount they have invested in the company’s shares. This means that personal assets of the shareholders are protected, and they cannot lose more than their investment, even if the company faces financial difficulties.

2. Separate Legal Entity: An LTD is a separate legal structure, independent from its owners. The company can enter into contracts, own assets, borrow money, and be held responsible for its debts, regardless of the personal finances of its owners.

3. Minimum Shareholder Requirements: At least one shareholder is required to register an LTD. There is no maximum number of shareholders, but LTDs typically have a small number of owners, particularly if they are private.

4. Minimum Director Requirements: An LTD must have at least one director. If the company has only one director, a company secretary must also be appointed (this can be either an individual or a corporate service).

5. Incorporation Documents:

• Constitution: This is the company’s founding document, replacing the older system of Memorandum and Articles of Association. It includes:

• The company’s name.

• The registered office address.

• Confirmation that the liability of shareholders is limited to their investment.

• Information on the company’s capital and shares.

• The Constitution no longer requires the company to state its object, providing greater flexibility for engaging in any lawful activity.

• Form A1: This registration form is submitted to the Companies Registration Office (CRO) and includes:

• The company’s name.

• The registered office address.

• Details of directors, the company secretary, and shareholders.

• A declaration of compliance with registration requirements.

6. Financial Reporting and Taxation: An LTD is required to submit annual reports to the tax authorities and the CRO. The company pays Corporation Tax at a rate of 12.5% on trading profits and 25% on non-trading income.

• From 1 January 2024, companies must register for VAT if their annual turnover exceeds €80,000 for goods and €40,000 for services. Companies below these thresholds may opt for voluntary VAT registration.

• Small companies may be exempt from mandatory audits if they meet the small company criteria.

7. Profits and Dividends: After paying Corporation Tax, remaining profits can be distributed among shareholders as dividends, which are subject to personal income tax.

8. Share Distribution: Shareholders receive shares representing ownership in the company’s capital. These shares can be transferred to others, facilitating changes in ownership structure. However, LTD shares cannot be freely traded on the open market, unlike in Public Limited Companies (PLC).

9. Small Company Exemption: Small companies may be exempt from mandatory audits if they meet the following criteria:

• Annual turnover does not exceed €12 million.

• Balance sheet total does not exceed €6 million.

• Number of employees does not exceed 50.

Advantages of Registering an LTD in Ireland:

1. Limited Liability: Shareholders are only liable up to the value of their shares, reducing personal financial risk for owners.

2. Company Independence: The LTD is a separate legal entity, allowing it to conduct business independently from its shareholders, protecting their personal assets.

3. Flexibility: LTDs are suitable for a wide range of activities and allow shareholders to transfer ownership easily by selling shares.

4. Tax Benefits: Ireland offers a low corporate tax rate (12.5%), making LTDs an attractive structure for both local and international companies.

5. International Opportunities: As a member of the EU, Ireland provides LTDs with access to the European market, allowing them to operate internationally with ease.

Disadvantages:

1. Administrative Obligations: LTDs must maintain detailed financial records and submit annual reports to the CRO, which can be complex and costly for smaller businesses.

2. Restrictions on Share Issuance: Unlike public companies, LTD shares cannot be freely traded on the stock exchange, limiting the ability to raise capital from a broad audience of investors.

3. Financial Transparency: LTDs are required to publish their financial statements, which may not be desirable for companies that wish to keep their financial information confidential.

Suitable for:

LTDs are especially appropriate for:

• Small and medium-sized enterprises (SMEs) that want to limit the liability of owners while maintaining management flexibility.

• Startups seeking to attract investment through share issuance while retaining control over the business.

• International companies that want to take advantage of Ireland’s low corporate tax rate and gain access to EU markets.

Example:

• Tech Startup: Many technology startups choose LTDs to attract investors. The company can offer shares to investors while ensuring that the founders’ personal assets are protected and that they retain flexibility in managing the business.

Private Company Limited by Shares (LTD) remains a popular business structure in Ireland for small and medium-sized companies, offering protection for shareholders’ personal assets, flexible management, and favorable tax conditions.