Should I move funds from Sole Trader to new Ltd company?

mrkat

I've been trading as a sole trader for an ecommerce site and have around £10k in the business bank account I had set up for that. I have just registered that business as a limited company and have a new business bank account. My accountant told me to immediately transfer all the sole trader account funds to the ltd company account to make it 'flow'. There has been a couple of weeks while the limited company has been open that I've still taken payments to the sole trader account as it took a while to set up the new bank account. 
Aren't the funds from the old account mine from working as a sole trader? 
I have another limited company and when I switched over that from a sole trader, my old accountant told me to start from zero and not transfer any funds over so now I'm confused. Can anyone offer any advice? Thanks

LittleVoice

The monies received should go to the account of the business which did the work/provided the goods or services which are being paid for.   As you know, you and the limited company are separate legal entities.  
Unless there is a cash flow problem not covered by an overdraft, don't confuse things with a loan from yourself (sole trader) to the company (of which you may be a director).

mrkat

LittleVoice said:

The monies received should go to the account of the business which did the work/provided the goods or services which are being paid for.   As you know, you and the limited company are separate legal entities.  
Unless there is a cash flow problem not covered by an overdraft, don't confuse things with a loan from yourself (sole trader) to the company (of which you may be a director).

Thanks for this, that's what I suspected so I don't know why my accountant said to do otherwise. Unfortunately she's not available until next week so hopefully there isn't something I've missed and I'll leave the money in the old account for now.

pramsay13

You should move in money that has been earned by the ltd company, but otherwise leave the rest.
I assume your accountant was making funds available for cash flow but if it's not required don't confuse things. 

CKhalvashi

A transfer of such nature is normally on a zero cash, zero debt basis, meaning that the income is taxed as a sole trader business until the date of transfer, and as a Ltd company from the date of the transfer, with stock transferred at cost.

If you wish to advance a further loan to the company, you are free to do so, however it's not something I would recommend doing.

bris

Yes the money before the company was set up is the sole traders (your) money, this will be treated as such on your self assessment. If you are putting it into the Ltd co then it goes into the directors loan account. Does the company need it? If not there is no benefit to lending the company money.

Any work done by the limited co should be transferred over to the new company or it could be treated as a dividend, taking corporation tax into consideration.

Not sure what your accountant was talking about tbh and would know it's not the new companies money.

Another discussion you should have with her is the benefits of dividends v a salary from the company.

AKarpik

If you want to formally loan money to the Ltd - draw up an agreement! - you can charge interest. Your loan will appear as a creditor to the company, the interest is a business expense of the company and income for you. You might want to extract a cash flow forecast from your software, or your accountant, to decide if, and how much, to lend.