I've agreed to do some bookkeeping for free for a small SEO company to gain some work experience as I've just finished a bookkeeping course with the open university and will be starting AAT soon. Long story short, I met with the guy today, and he is currently in between businesses as he's becoming a limited company. I'm keen to give it a go but I'm feeling a bit out of my depth as I had hoped to be working under someone who could support me. Just wondered if anyone had any tips with dealing with this sort of changeover- is there anything I should be aware of/thinking about, complications that might arise- any assistance would be very much appreciated.
Does the person have an accountant?... If not, they need one as whilst they may successfully handle a transition they may not realise that they are losing out.
The two entities are quite seperate with self employment being an extension of the owner and the limited company being a totally seperate legal entity.
I ask about the accountant as there is quite a bit to know to ensure that everything has happened correctly and that the business owner has received all the necessary advice about relief available on incorporation.
For example the proper handling of brought forwards overlap profits. Imlementation of closing period rules, etc.
It really is as though one business is ending and another beginning rather than as most people perceieve it simply a matter of a change of legal form.
The assets of self employment are treated as though sold to the company and if not treated properly that could result in unneccessary capital gains.
As you are only agreeing to being the bookkeeper it would be a good idea to be the bookkeeper of the limited company, not the bookkeeper of the changeover.
The accountant will give you all of the opening balances of the business.
You will find the worst part of the transfer being reprogramming the owner to realise that the money the company takes is no longer his but rather the companies and he need to account for every penny that they take out of it.
Personally I find that those who have previously been self employed are terrible for regarding companies as personal piggy banks and they need to be guided away from that mentality.
If it is simply a matter of a fresh start with a limited company then you will encounter issues such as payments made to the old self employed business but thats to be expected in the transition period. The reality of that situation is that the sales and purchases are by the limited company and should be treated as such whilst ensuring that all clients are properly informed of the transition including ensuring that standing orders and direct debits are changed to the company (although some banks will handle all of that side of things where it is simply a straight conversion of the account).
The accountant will / should do things such as changing VAT registration, Payroll, set up for Corporation tax but as much as possible you will need to keep a weather eye out for anything that still refers to the self employed business as absolutely everything needs to change.
Hope that helps for starters, sure others will be offering additional insights imminently,
welcome to the forum,
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.
wow thanks, that was both amazingly fast and informative!
He does have an accountant and the limited company is already set up as far as I'm aware, he's currently winding down the sole trader business so all new contracts are signed up to the new business. I'm just a bit nervous about taking work on without some sort of supervision but I guess the accountant will be doing all the complicated aspects of it. Thanks very much for your help, its put my mind at rest.
Hi Fran - just wanted to ditto Shaun's advice really. I have 3 clients that went from Self Employed to Ltd Co and agree that there is a big change to the mind set, and the Ltd Co must be thought of as it's own entity.
Can you phone the Accountant to introduce yourself and ask him what he/she needs from you? Chances are they will be friendly and you'll have an allie, then you won't feel quite so alone on the job.
Great, I'll make sure to keep a close eye on that then. He's already admitted to dipping in and out of the old business fairly regularly but thus far he's kept his fingers out the ltd company, that might not be the case once the wind down has completed.
There is a meeting with the accountant due to be arranged, hopefully as soon as possible as someone else recommended I get an assignment agreement drawn up and I'm not sure that the owner is the best person to do that, least not on his own.
In the UK what you refer to as an Assignment Agreement is generally refered to as an engagement letter and its a good idea to have one in eplace with all clients to clarify responsibilities and the point to if things go wrong.
For some examples I posted a thread on here the other day in relation to the joint ATT, CIOT, ICAEW, ACCA, ICAS and IIT project to improve tax engagement letters.
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.
