Signs it's time
- Your profits are regularly hitting the 40% income tax band.
- Clients or agencies want to contract with a company.
- You're taking on staff, premises or bigger contracts and want limited liability.
- You'd like to leave profits in the business to reinvest.
The steps
- Incorporate a new LTD (see how to register a company).
- Transfer the trade, equipment, stock and goodwill into the company — your accountant will advise on values and any capital gains tax relief available on transferring a business to a company.
- Register the company for corporation tax, VAT and PAYE; cease your sole trader VAT registration where relevant.
- Move contracts, bank accounts, insurance, payment accounts and suppliers into the company's name.
- File your final sole trader Form 11 covering the period up to the transfer.
This is exactly where a good local accountant earns their fee. Get matched with one who does this regularly.
Frequently asked questions
Is there tax when moving a sole trader business into a company?
There can be. Transferring assets and goodwill can trigger capital gains tax and stamp duty, though reliefs may apply if the whole business is transferred for shares. Take accountancy advice before you move.