Incorporating a partnership

JJH1969

I have read that a partnership needs independent valuation on incorporation - does anyone do this and if so who do you use? If not what method of valuation do you use? Also when you register the limited company name (presumably before the accounts are closed and valued) what do you do about the share capital as you dont know how much it will be until the valuation. The partnership I am working on has no fixed assets just stock, debtors, creditors and bank. Sorry about all the questions ! Hope someone can help:001_smile:

Antoinnette

I would like to know too...

I am bumping this one really...I am in the process of incorporating a partnership as well and like you I look at the two months waiting time to get the CG34 through and the need to incorporate now and find it very confusing. If the incorporation happens now with just 100 shares for £1 for e.g would I need to change the nominal value of the shares to fit the valuation? And would they have to wait for the valuation to come through before deciding the amount that is credited to the DL? It will be great to see what other people have done.

JJH1969

Somebody must know:001_smile: - the business I am looking to value is a lighting supplier. Do you set up the Ltd company with a couple of shares and then value and issue more shares later?
HeLLLLP

groundy

The value of the business has no reference on the number or value of shares. We normally issue one share each or fifty shares each when it is a equal partnership.

You would then introduce Goodwill in the first set of Limited Company accounts to reflect the value transferred. We have never used the CG34, we just place a fair value on Goodwill. I believe the CG34 is geared to large businesses and HMRC have a reasonably relaxed view on smaller Goodwill valuations.

JJH1969

Thank you for the reply - what is the double entry for the goodwill when you bring it in then?

groundy

Dr Goodwill
Cr Directors Loan Account

You need to be careful that any CGT is accounted for on the individual who is disposing the Goodwill

JJH1969

Great Thanks

Gill Gittings

groundy wrote: »

Dr Goodwill
Cr Directors Loan Account

You need to be careful that any CGT is accounted for on the individual who is disposing the Goodwill

I don't think you can just do this. Doesn't accounting standards prohibit goodwill that hasn't got a market value being recognised? I'm sure I read that somewhere. Also I recall one of our clients being challenged by HMRC for the valuation. I would go down the CG 34 route.

Townend

This is a great read.

You would need to fill in a CD34 form although I have been requested by HMRC to supply for further details regarding past 3 years accounts, copy of valuation report and a few other details.

The company in question has only been running for 2 years so now I have to contact HMRC about more information that they require.