Switching from Sole Trader to LTD

[lofty]

Hello,

Can anyone explain what is different with regards to accounting when switching from Sole Trader to a Limited Company? Would I require an accountant or would software such as kashflow (which im currently using) provide the required info for companies house?

 

[Mike Lewis]

No, there is no obligation to use an accountant, even if you are a limited company. However, if your turnover is above a certain figure (it used to be £100,000 but is probably higher now),you are legally obliged to have your accounts audited, which of course requires the use of a qualified professional.

The day-to-day bookkeeping for a company is much the same as for a sole trader. The main differences are that a company has to send in a corporation tax return, and a return to companies house.

I don't know whether your software can meet those extra requirements, but if you already own a copy of the software, surely you can see that for yourself.

I'd also add that software can never replace the services of a professional accountant. It can do the day-to-day bookkeeping, but it can't really provide the advice that only a person who understands your business can give.

Hope this helps.

Mike

 

[Gouldie0]

No, there is no obligation to use an accountant, even if you are a limited company. However, if your turnover is above a certain figure (it used to be £100,000 but is probably higher now),you are legally obliged to have your accounts audited, which of course requires the use of a qualified professional.

The day-to-day bookkeeping for a company is much the same as for a sole trader. The main differences are that a company has to send in a corporation tax return, and a return to companies house.

I don't know whether your software can meet those extra requirements, but if you already own a copy of the software, surely you can see that for yourself.

I'd also add that software can never replace the services of a professional accountant. It can do the day-to-day bookkeeping, but it can't really provide the advice that only a person who understands your business can give.

Hope this helps.

Mike

Hi Lofty,

Due to the companies act, small businesses do not need to have their accounts audited unless their turnover exceeds £5.6 million or their balance sheet exceeds £2.8 million.

There are differences between the accounting requirements for a sole trader and a company. As Mike has stated you need to submit abbreviated accounts to companies house and full statutory accounts to HMRC along with a CT600 form (corporation tax return).

Drawing money from the business is also more complicated as technically the limited company is a seperate entity from yourself. If you want to draw profits from the business as a dividend then you need to (legally) calculate how much profit you have after you've worked out your corporation tax and complete board notes and a dividend voucher - this will keep the tax man happy.

There is no obligation to use an accountant but I would expect you to have a decent level of experience of submitting these kinds of documents for you to be able to draw them up yourself.

Also as Mike suggested, software won't keep you up to date with the latest legislation. If you would like to discuss your company formation further just PM me and I'll assist in anyway I can.

Kind Regards

Neil Gould