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Sole trader to Ltd Company!

monkeypuzzle47monkeypuzzle47 Feels At HomeMAAT, AAT Licensed Accountant Posts: 134
My sole trader client has now become a ltd company part way through 08/09. (actually my husband who is my first ltd co guinea pig)
His balance sheet at august has over £10000 in fixed assets (vehicle/tools).

How do i go about bringing this asset investment into the limited company is it just a case of debiting the opening balances to the various asset accounts and crediting directors current account so that it shows the company has a liability to the director of £10000. Please help im a little confused sorry in advance for sounding thick??

Im using vt final accounts too.


p.s Also i need to know if im actually able to prepare my husbands final accounts as an mip, or is this considered to be a conflict of interest im not sure of this too.

regards, Jenny

Comments

  • K HK H Feels At Home Registered Posts: 81
    Sole Trader Ltd Co

    Yes you are correct to credit the Directors Loan Account and debit the Fixed Asset Account, but remember you wouldn't be able to claim first year capital allowances twice on the same asset.

    Were there any other assets to transfer such as stock for example?

    Has you husband been trading long? Could he not have sold some goodwill to the company prior to 5/4/08 and used up the full business taper?

    i'm not sure about the conflict of interest maybe someone else might know.

    best wishes

    K H
  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,071
    I can't see why it would be a conflict of interest. There's no legal obligation to have small company accounts prepared professionally and independently, just accurately and in the correct format.

    Watch out for any transferred free (i.e. not dependent on your husband but freely attached to the business) goodwill, as this needs to be done accurately, and may or may not give rise to CGT. As KH says if some of this could have been done in 0708 that's preferable, as 0809 entrepreneurs relief is pants in comparison. If the company did not exist in 0708 thats a non starter.
  • BenBen New Member Registered Posts: 14
    Incorporating a business

    Alternative is the issue of shares in return for the assets transfered to the company on incorporation.
    Advisable to have transactions evidenced by documentation where assets sold to the company (Hence crediting director's account).
  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,071
    Ben wrote: »
    Alternative is the issue of shares in return for the assets transfered to the company on incorporation.
    Advisable to have transactions evidenced by documentation where assets sold to the company (Hence crediting director's account).

    That was my understanding of it. Otherwise anyone incorporating would be 'owed' the value of the net assets, giving rise to a tax-free repayment from the company. IIRC the only sale that gives rise to this on incorporation is the sale of free goodwill.
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