How do I change from being a sole trader to having the protection of a limited company?
My question is really how do I formally "activate" the protection of a limited company (which I have already bought off the shelf) and transfer out of sole tradership? Do I need to inform someone that I am switching or is it from the point of submitting company accounts. My accountant is confusing me! Thanks
Other - Business & Finance - 3 Answers
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Answer 1 :
If your accountant can't explain the situation in ways that you can understand, then speak to a different accountant. If that still doesn't help, you likely need to contact a lawyer. You're dealing with issues that are both financial and legal, and speaking with both might be the best thing, anyway.
Answer 2 :
i believe you register your sole proprietor business somewhere. it should be the same governing body that takes care of registration of a private limited company. in my country, we do all these at the registrar of companies. i believe you guys will have similar governing bodies.
Answer 3 :
Your limited company needs to buy the assets and goodwill of your sole trader business. You also need to inform all your customers, suppliers and other contacts that your business has now been incorporated. From a financial point of view, your sole trader business has ended, so you need to draw up final accounts. There may also be capital gains implications, especially if the goodwill of your business is valued highly. You may have the choice of paying this now, or "rolling over" the gain into the shares you will now hold in the ltd company. The "purchase" of the assets can be in return for shares in the ltd company. You will own both, so the net value of what you personally own does not change. Bear in mind that the "protection" is going forward only. You cannot avoid liabilities that have already been incurred as a sole trader. Your accountant or solicitor should be able to advise you on all of this.
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