Forum

• # 80788
• Tue 13 Mar 2012 01:24 PM

I have a client currently carrying on business as a sole trader. He is converting his business to run it through a limited company (of which he will be sole director/shareholder). The two main assets are money in the bank account and a van. Funnily enough, I've never actually had to deal with incorporating a business, and am a little unsure of myself.

At a bare minimum, the new company needs the van in order to run the business (it is an integral part, as it's a delivery company). Could somebody help me with the options available for this? Does the company have to buy the van in exchange for share capital? Can it be done through director's loan? Are there pitfalls I should be advising him of (e.g. tax)?

Any input would be appreciated on this or any other elements I should be aware of on incorporation of a client's business.

Thanks in advance

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• # 80799
• Tue 13 Mar 2012 03:19 PM

Hi,

I've never had to do this myself but I would assume that the van is bought through the company either through the directors loan account or through the companies bank account-paying himself as soletrader and then written out of the soletraders accounts using the capital allowance schedule.The same would happen with the cash apart from the capital allowance part.
You would then need to close the soletrader accounts and start afresh as a limited company.
In the self assessment tax return, the profits from sole trader would be included as well as any dividends and paye from the new company. A corporation tax return would assess the profits of the new company.

Hope this is of some help but hopefully you'll receive some other answers too.

Regards

Karen 

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• # 80800
• Tue 13 Mar 2012 03:24 PM

But in order to buy the van through the company’s bank account, there has to be some money there first (at the moment, the company is a shell). So I’m chasing my tail a bit...

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• # 80812
• Tue 13 Mar 2012 04:31 PM

If there is no money in the business bank account I would debit Motor Vehicles and credit DLA.

Steve

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• # 80813
• Tue 13 Mar 2012 04:32 PM

Hi Danya,


All of my clients are limited companies - one of the most importants thing to remember with a limited company is that it is a "seperate legal entity".


I have had one of my clients incorporate his Sole Trader and what the accountant did was actually combine the accounts, so all of the sole trader transactions were taken into the Limited company's accounts - I think there was a disclosure made. This would be the easiest way to do this but you will need to speak with your clients accountant for clarification.

This way the van would already be in the books without having to make an adjustment, but as I said please clarifiy with the accountant the correct way to do this.


Hope that helps!       

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• # 80814
• Tue 13 Mar 2012 04:46 PM

Hi Lady M – yes, I have no problem dealing with either sole trader or limited companies. This is the only one I have had to convert from one to the other, though!

I’m intrigued by what you say about combining the accounts – I’ve never heard of such a thing before.

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• # 80815
• Tue 13 Mar 2012 04:49 PM

Sorry – DLA?

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• # 80823
• Tue 13 Mar 2012 06:59 PM

DLA-Directors Loan Account

• Stacey Cort
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• # 80830
• Tue 13 Mar 2012 10:22 PM

> Hi Danya

Unfortunately it is not that simple as there is also an element of goodwill to take into account from the sole trader to the limited company.

This has both tax advantages and implications the best option here is to get his accountant to deal with this and give you the companies Opening TB.

Essentially it will the NBV of the sole traders assets plus any goodwill.

Kind regards
Stuart
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• Forum Moderator, South East & Greater London Regional Chairman
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• # 80831
• Tue 13 Mar 2012 10:27 PM

Thanks very much to all of you – sounds like I should probably get an accountant to lend a hand in case of any tax implications.

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