Has anyone on here become a Ltd company instead of a sole trader.Is it straight forward to do and are there any benefits.Is it harder to get finance as a Ltd company.
We changed from sole trader to Ltd Company 4 years ago. Just set up a new Company which we did on line. You have to have new bank accounts in the Company name. Also have to inform your suppliers that you have changed your status. We didn’t have any trouble with this, they all just started new accounts for us with the existing credit limits. (However we had been trading as a sole trader for nearly 90 years).
You will also need to appoint an accountant as they have to submit accounts to Companies house on your behalf every year.
If you are VAT registered, you will need to re register for VAT in the Company name. You can request to keep your existing VAT number if you wish.
The most important thing is that if you have an O licence, you will need to apply for a new licence in the Company name. You will need to show adequate funding also in the Company name. They won’t accept funding in the sole trader name. However, if your are not going to change anything else with regards to your O licence and will surrender the existing licence, they will grant you permission not to have to advertise the application in your local paper.
If you employ any drivers etc as a sole trader, you will have TUPE them over to the new company and issue them with new contracts.
If your currant accountant tries to discourage you from becoming ltd it’s often because they can’t handle the books of ltd companies ,I did it 11 yrs ago after sole trading it’s an instant money saving .
It won’t be any harder to get finance as you will be asked to give a Director’s Guarantee in most cases, so it comes back to you if it goes pear shaped.
Can I ask what your reasons are for going Limited?
I would advise that you seek an accountants advice. Recent Budget changes means dividends are now taxed, and this means an increase in your tax bill if you pay yourself this way ( which is the reason many sole traders change business status).
nyk473l:
You will also need to appoint an accountant as they have to submit accounts to Companies house on your behalf every year.
You don’t have to appoint an accountant to submit to Companies House, if your turnover does not exceed the threshold. I think that is something like £320,000. You can do it all yourself including Corporation Tax return.
If you change from Sole trader to limited company DVSA may require you to apply for a new O license as they view the legal structure and ownership has changed.
This is very important to bear in mind. Likewise if you just chop on and dont tell them they can revoke your old license and you will be up a well known creek without a steering implement.
I trade as a limited company, it cost about £15 and took about 15 minutes to set up. Just search for “start limited company online”.
The main advantage of trading as a limited company, by a country mile, is that your trading finances are separated from your personal finances. Suppose you have an accident, or incident which results in a loss to somebody of £250,000 and for some reason the insurance refuses to pay out (you forgot to tell them you were fined £2 for dropping litter in 1963 or something). As a sole trader you can be chased for every penny, up to and including having your house snatched. As a limited company, all they can go after is the money in the company name, and naturally if such an event occurred you would just clear out the money from the company account and then wind it up.
Janos:
I would advise that you seek an accountants advice. Recent Budget changes means dividends are now taxed, and this means an increase in your tax bill if you pay yourself this way ( which is the reason many sole traders change business status).
You should only consider going Limited on the advice of an accountant anyway, tax savings are the only reason to do it. Reduced liability doesn’t make any difference if you have signed Director’s Guarantees on any finance or credit agreements.
Bang on Harry,the only thing to be careful with is that you pay your personal costs such as mortgage,car finance etc out of your wages after tax,an old mate of mine paid for these out of the company account and lost everything when he went into liquidation. 