I am thinking of moving from sole trader to Ltd company status but not sure what I would need to do with my sole trader bsiness. I would want to use the same name and continue trading the way I have been recently with the same clients. Do I just close down my current trading and inform HMRC that am no longer trading and stop my accounts where they are and start a new seperate set of accounts for the Ltd company or is there a way I can transfer the accounts over to the new status. Any help or advice will do here as not so sure right now.
You would first need to check that you can have your name.
Go to companies house webcheck to look for available names.
Just have a look at Balcom and it's a disolved company (incorporated in 2008 and disolved in 2009 without ever filing any accounts) which means that subject to a slight bit of extra wrangling that names currently up for grabs so might be worth getting a premptive reservation of the name in there before it's gone again.
Of course you might still get hassle from creditors of the original company if it died in debt but you will have a different company number to prove that you are a completely different kettle of fish.
HTH,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Thanks Shaun, maybe not a good idea using the same name as getting calls from past clients of the dissolved company might not be so helpful. Was hoping I could get some advice regarding how to account for this and also if there were any others that had done the same and what there experience was like changing over and how they went about it.
My limited company name was previously in existence and had been dissolved and i have never had any enquiries from anyone related to the previous company. Given it is 3 years since dissolved i dont think there would be any issues. If there are you are a completely different business with a difference reg number.
Anyway, the process of transferring the business over is fairly simple. The easiest way would be to settle a the trading debtors and creditors through the sole trader. After that what is there to be transferred over? I expect some assets eg computer, printer, some fixtures and fitting etc? Would really depend on what you are transferring. Any assets you would transfer them over at fair value with a corresponding credit to your loan account (assume you will be a director so would be directors loan). The assets should be transferred at TWDV for tax purposes. You may have some goodwill to transfer. Will depend on how your sole trader has done over the last few years and if the goodwill is inherent to the business eg name/reputation over and above just goodwill being solely related to you. Simple way to calculate would be to calculate the avg profits for the last say 3 years. Take off a reasonable salary that a manager would expect. Deduct say 20% for CT and whatever is left multiply by anything between 3 and 5 to see what your business is worth. Any goodwill would create a corresponding credit in the directors loan account which could be drawn tax free from the business. You would of course be taxed personally on the goodwill but if less than your capital gains allowance then there would be no tax to pay. I think the goodwill can be amortised and obtain tax relief through the company. Maybe someone else can confirm or correct me? Cant remember the current rules.
You would need to inform HMRC that you have ceased your sole trader and started your company and would need to register form PAYE/NIC if you are taking a salary and for VAT if you are over the threshold. If your sole trader is reg for VAT would be a TOGC for VAT purposes
Alfred, don't let it put you off retaining the trade name you've built up. You can get that sort of thing even under the most normal circumstances. It could happen if you took over premises conducting business in an entirely different sector.
I took over a phone number previously used by "***** Damp-Proofing". After several years of calls from their old customers looking to invoke their 10+ year guarantees, I started questioning these callers to find out where the business was based (local tel. number). After a little more digging I found there was a company trading from the same address a mile away .....you guessed it ...... "***** Double Glazing"!
I may have given these disappointed customers the double glazing firms phone number once or twice. lol
I dont think i have any goodwill to be honest as have only been trading for less than 2 years now and still building the business, but that doesn't sound to much work so just clear my debtors and creditors ledgers and just transfer my assets over at depreciated value. Then just let HMRC know I have stop trading as a sole trader. Would I need to show this transfer in the sole trader accounts or just finalise the accounts at closing and make adjustment for transfers in the company accounts to start. I assume that I can just take back any capital I put in to start and just do a tax return next year to pay off any tax from profit I have made.
@Don tax If i get anyone contacting me I could turn it round by offering to do their books and chase the debtors they were chasing me for, any way to make buck.
You could show the transfer in the sole trader or not. If you are transferring at depreciation value there is no gain or loss so just a balance sheet movement.
Personally i wouldnt bother, transfer to ltd company at NBV and start claiming capital allowances based on the TWDV you have left in your personal tax comp.
Yes you can just take whatever money is left in the sole trader business and use it to pay any tax due for the sole trader in the final period of assessment.
Then let HMRC know you have ceased trading through the sole trader, started trading through the limited company and are transferring the asset at TWDV for capital allowance purposes to HMRC. You have 2 year window to make the election.
Hi Marks is right. Thats what our accountant did for my husbands business. Set up the new company with companies house, transfered assets and goodwill. Don't worry to much about the name on companies house, you will probably get something very close to what you are after. Your advertising name doesn't have to be the exact same as what is registered on companies house--Thats what we were told anyway.
