Many businesses are incorporated for tax saving reasons or to protect the shareholders wealth, but the directors are often not told what they need to do next. Here are a few basics.

You will need to tell the following about your new company:

Bank

Your bank will need to be told so that they can accept cheques made payable to the company, but also so that overdrafts and other arrangements are officially changed into the company name. You may find that if you have an overdraft  you will be asked to sign a personal guarantee. This will mean that you have to personally pay back the bank overdraft, if you ceased trading for any reason.

Customers and suppliers

You should make sure that both the people that you sell to and buy from are aware that you have change the business’ status. This will ensure that your customers pay the right business and that your suppliers chase the company rather than you for payment. Some suppliers may ask you to complete a new credit application form and may change their terms.

PAYE & VAT

HM Revenue and Customs needs to be informed of your change from a sole trader to a limited company. This involves transferring the existing registrations to the limited company or cancelling them and setting up new registrations depending upon your circumstances. You will also need to cancel the Class 2 National Insurance Stamp. In addition, you will need register the company for Corporation Tax.

Correspondence

You will need to show the company name, registered office and company number on all correspondence that you send out on behalf of the company. This includes letters, emails, orders, faxes and invoices. You can also choose to include details of the directors and company secretary, if you wish, and your trading address if it is different  from the registered office.

It is important that you make everyone that you deal with aware of the changes, so that there can be no disputes at a later date. After all, there is no point in having a limited company, if at a later date you find you are personally liable for an obligation.

 

Brian Russell is Managing Director of Russell & Co Chartered Accountants, based in Ponteland. He can be contacted on 01661 872004 or by email at brian.russell@profitabilitygroup.co.uk .