Company Formation for a sole trader

RichardV6

Hi Everyone this is my first post so please be gentle!

Ok here is my problem, my father is a sole trader he runs a fairly sucessful business. However he has cancer and is currently recovering from his operation.

He has given the business to me as I helped him financially to start it and survive the first few years.

But we are VAT registered and I know we will lose the VAT number if he ceases his SE. So i was looking into forming it into a LTD co to enable us to keep trading as normal, is it as easy as the online places have you believe??

How do I continue the VAT registration using the new company name?
Does the business bank account get transferred easily for the new name?
He has trade insurance for his vans, does this get changed easily enough?

I'm currently running things for him without taking any salary (as I do not want to be classed as SE if I'm soon to become an employee / director)

How does the new budget affect small companies? Ie the corp tax changes.

Any advise on what to do would be great, it has been a difficult time with the cancer and all and any help / advice is greatly rcieved.


Thanks in advance

Richard

:beer:

HariboJunkie

First of all I'm sorry to hear about your Dad but it is great that you are able to take some pressure of him.

Secondly go to the business link website which should answer all your questions. http://www.businesslink.gov.uk/bdotg/action/home?domain=www.businesslink.gov.uk&target=http://www.businesslink.gov.uk/

Changing from ST to LTD CO is relatively easy. You need to set up the LTD co and register the name with someone like Nominet, issue shares, create the co director and secretary, then inform HMRC who can advise you about VAT registration.

As regards the budget... Corp tax has gone down for big business and up for small see this link for more detail http://news.bbc.co.uk/1/hi/business/6473993.stm.

There will be other more experienced people around at a more reasonable hour but I hope this helps.

Timmne

It's dead easy to set up a limited company, but please consider the 'side effects'!

You'll need to keep up the admin such as annual returns, statutory accounts, directors' tax returns (compulsory for them to file one) and a couple of other bits.

You'll have increased accountancy bills - probably no less than £500 (based on what our chartered accountants who are a 'sister company' charge) but more likely £1k if the business is a successful and highish turnover business.

The way you look after your books will change - no drawings allowed (Directors' current account instead), share capital, PAYE scheme to pay your dad unless he has dividends but then you'll need to be looking carefully at his tax situation.

The big benefit to incorporating would be that your dad would probably be able to withdraw a chunk of goodwill if his ST business is successful as he would be 'selling' the business to a Ltd co, despite it being owned by the same person.

If you want to go ahead with it, please make sure you get an accountant to talk you through it and help you along the way - this is imperative to ensure you don't make any tax mistakes!

Sorry to hear about your dad - glad he's on the mend though, hopefully he gets back up to full speed soon!

WHA

Why do you think you need to start a limited company? You can apply to register for VAT and take over your father's VAT registration number as a sole trader - you don't need to be a limited company. In fact, I can't see anything that your own limited company could do that you couldn't do as a sole trader yourself. If you have a ltd co., yes you will need a new bank account (the same as if you were a s/t), yes, you will need new insurance in the company name (the same as if you were a s/t). There is nothing magical about you setting up a limited company to take over your father's business - it won't be easier - it will be harder due to more admin and bureaucracy.

The question should really be (and perhaps this is what you are thinking) is whether YOUR FATHER should transfer his business into a limited company in your father's name - and then transfer his shares in his limited company to you, making it YOUR limited company. Now in this second scenario, there is scope for things to be easier and simpler FOR YOU, but your father will have to deal with the transfer himself.

Have your father and yourself spoken to his accountant for their advice - that is surely the first place to start as your father's accountant knows the business and should be able to advise on the best way to achieve your aims.

RichardV6

Hi All,

Thank you for your responses, you have all given me a lot to mull over. It looks like the way forward is to cease my Dads SE and start my own, but by transfering the business as a going concern.

We havent spoken to an accountant, (I should point out that my Dad is recovering from mouth cancer, and the operation has left him very self concious of his speech, so there is virtually no chance of him approaching an accountant for advice) as we havent actually used one in the past, tax returns have been completed by myself on his behalf, book keeping is done by my mother, she handles all the VAT and accounts (She has completed a course in bookkeeping prior to business startup 6 years ago).

Someone mentioned "Goodwill" I take it that wouldnt be applicable if we dont incorporate?

Once again thanks a lot, I will no doubt be asking for more advice over the coming weeks.

Regards

Richard