change to limited company

thetourist

hi would anyone be able to advise me how difficult it would be to change from being a sole trader to a limited company. i have been trading as a sole trader for a number of years but my turnover was small becase i was only working the business part time, but recently i have gone full time, and i am trying to decide on whether or not to go ltd. after reading all the pros and cons i am dubious if it will benefit me in the short term; but i hopefully will want to go limited in the next few years. So now I am trying to find out would i be better off to bite the bullet now rather than later; bearing in mind that i am really busy with all the peripheral things to do with company startup and i would really like to put it off for a year or two, however if it's going to be a LOT MORE work/money at that point, then i might just go for it now.

any opinions appreciated
thanks

dahamsta

Generally speaking it's more of a switch than a change; while I'm sure there are ways to merge a sole trader operation into a limited company, the easiest approach is to shut down operations for one and start up with another. Otherwise you have a lot of hassle with migrating bank accounts, revenue logins, etc; some of which might not even be possible. There shouldn't be much of a difference on low to medium trading volumes, but goodwill and a trading record could be important factors, particularly if you intend looking for credit for the company at some point.

I switched to limited in March of this year, it was the best decision I ever made. Should've done it years ago. You'll be shocked at the different way you're treated by vendors, the discounts you're offered, etc. Of course there are higher costs too which probably cancel that out in the short term, but it's still a revelation.

adam

thetourist

thanks ...

I switched to limited in March of this year, it was the best decision I ever made. Should've done it years ago. You'll be shocked at the different way you're treated by vendors, the discounts you're offered, etc. Of course there are higher costs too which probably cancel that out in the short term, but it's still a revelation.

would you think it's reasonable for me to put it off for a year or two ... ?

dahamsta

Asked and answered. If trading volumes won't change much, and goodwill and/or a trading record aren't a big factor, then it shouldn't make a difference. If the opposite is true, then it might be better to change now. But you should be asking an accountant anyway.

adam

thetourist

thanks for your help

dahamsta

You're welcome.

Sonnenblumen

There is a distinct difference between the two trading entities, and for a relatively seamless transition, you should decide when is the least disruptive time to make the change ie close down existing (sole trader) business and start new (limited co).

An obvious time is at financial year end but work backwards and allow plenty of time to complete switching of accounts at banks (assuming of course you intend transfer sole trader balances to lim co) . On the other hand you can make a Directors loan to co to get the lim co account (current) up and running and thus ensure all bills are paid promptly. When the dust settles you can finalise the fin arrangements etc.

Although there are some additional costs and responsibilities involved, there are several distinct advantages to being an owner director. Lim cos also enjoy better credibility and hence better credit terms with trade etc.

Postponing for 1-2 years would seem strange, if its something you plan to do and there are no obvious obstacles currently, then it would be more advantageous done wooner than later.

Your accountant should be able to fill you in on the financial and tax advantages etc.

Good Luck