Changing from sole trader to Ltd

[danthevan]

Hi all,

hope someone can help with these few questions.

I've been trading as a sole trader for about 3 years (steel fabricator), and now want to go Ltd. I already have everything in place to start (registered at company house, bank accounts, stationary etc)

First question is can i run both businesses side by side for a transitional period? Basically, some of my customers are on 90 day payment terms, as with some of my suppliers. If i pick a changeover date, it's going to make things awkward so would rather (if possible) slowly drag customers over to the ltd company over the course of a few months.

Secondly, can I register the Ltd company Vat number different to my sole trader number or will HMRC insist on keeping the same number? This again would make things easier.

Thirdly (this is the bit that really confuses me!), from a brief chat with an accountant, I have to put a value on the business. I can work out tools and stock, but how do I work out what the business is worth? Also, im guessing the tools and stock belong to the sole trader side of things, does the Ltd company 'buy' these from me as a sole trader / or does it go down as me putting in £x into the ltd company (probably worded wrong but you know what i mean?!)?

Any help much appreciated!

 

[jim_gold]

Hi danthevan

1] Yes, you can run the businesses side by side for as long as you need to
2] You need a different vat number for the limited company
3] Here you need an accountant to decide how best to manage the transfer of the assets across, not least because you'd want to minimise your tax obligations. I may be mistaken but by placing a value on your sole trader business in excess of the asset valuations i.e. adding a goodwill figure, you could become liable for capital gains tax liability.

 

[SpecialBranchTrees]

Hi there,
We did this same thing in 2011 when the, then, accountant told the MD that he may as well go bankrupt because the VAT fines would cripple him anyway... absolute pish! As the Ltd co we didn;t go anywhere near the threshold for at least another 9 months.

The main problem we've had, and are still having, is that we're still using the sole trader bank account because it has the overdraft facility & although we've set up a Ltd co account (twice) they won't change over the overdraft, and we need it.

Our new accountant was great with the changeover finances, and even got the MD a £2.5K personal tax refund. He had a list of all the things that need to be changed including vehicle ownership, insurances, mobile phone contracts etc so maybe yours does too.

Good luck, it is worth it in the end.

 

[danthevan]

Brilliant!
Thanks for the replies, made things much clearer in my head!

 

[stevo5678]

Hello,

It can be straight forward but there are many areas to consider and you can potentially save a lot of tax.

You can consider selling goodwill to the Ltd co from the S/T if it has arisen post Mar 2002 which can save tax, plus you need to consider share structure etc.

Let me know if you want any more advice (contact details are on my website).

Steve
www.cheltenham-tax-accountants.co.uk