My partner is currently a Sole Trader and his business has been running since June 2011, I am his company secretary. He is an Electrician.
We are looking to start up a limited company as would like to become a facilities company offering other services in addition to the electrical installations. Limited Company status is definitely the way to go for us but I have a few queries and I am hoping someone can help.
My partner will be the sole Director and Shareholder of the new Ltd company.
Can anyone help me to answer the following:
My partner has assets from the existing company (A van, office equipment etc, and tools to carry out the work) which we would like to be transferred to the new Ltd company. How do we go about this? How should the assets be valued, and are they sold to the new company in exchange for shares? How does it work?
On the Companies House registration application it says about the number of shares and their value - could this just be 1 x £1.00 or would it need to account for the assets being transferred to the Ltd company? There will be no other shareholders. Does the share value affect the amount of dividends that can be taken and how often?
Are there restrictions on withdrawing dividends from the Ltd company and if so what are they (I know it can be only done on profit). My partner will continue to work for the company as an electrician so he will be on PAYE. Am I right in saying he will need to inform HMRC that he is no longer self employed? I have read that as a director it would be more tax efficient to take a very minimal salary by BACS and then withdraw dividends - has anyone got advice on this please?
The current business is VAT registered - should we wait for a certain time to become incorporated or can it be done at any time? Will the VAT returns continued to be filed as normal?
How is corporation tax calculated?
Some general guidance on setting up the LTD company would also be much appreciated, things to consider etc. I am posting on here as first point of call.
Would advise to go and speak to an accountant and get professoinal advice on what needs to be done.
However to answer your queries in turn
1. Easiest way would be to introduce at TWDV into the limited company. Would be adjusted against the directors loan account
2. Shares are issued to shareholders. If just one shareholder then easiest to just issue 1 share to your husband. Doesnt affect the level or how often dividends can be taken but dividends can only be taken by shareholders.
3. You can only declare a dividend if there is sufficient retained profits after tax. The company will need to be registered for PAYE if your husband is an employee of company. Dont think you need to inform HMRC that he is no longer self employed as given a director will still need to be do a tax return (though there is debate as whether this is legally correct). Yes basically is tax efficient to take a minimum salary of £146 per week/£7592 per year. This will get him credit for various benefits eg retirement but wont have to pay any tax or NIC. Depending on other income he has he will be able to take up to the higher rate band (which is £42,475) in dividends and not pay any tax on the dividends. A notional tax credit of 1/9 of the dividend taken will be added to the cash dividend to get the gross dividend for tax purposes. Eg if he takes £900 dividend in cash then for tax return purposes this is £1k.
4. If the business is be transferred from sole trader to ltd company then this is a "transfer of a going concern" for VAT purposes and you should be registering the Ltd immediately. The limited company is a separate legal person to your husband so will need to be registered separately with different VAT number (although the VAT number can be transferred if you wish).
5. CT is calculated at 20% on the first £300k of taxable profits (assume your taxable profits will be less than that). You need to adjust your accounting profits to work out your taxable profits.
As you can see all in all a lot to be done and put into place. In addition you may have goodwill that can be realised on the incorporation of the limited company and transferred to the directors loan account which can be withdrawn tax free as cash flow permits. Again this is something an accountant could advise on.
