How to Transfer Assets to a Limited Company?

Incorporating your company is a huge step, but there are a few challenges you need to see first. If you are a sole trader running your business, consider playing with your assets and whether you must transfer them to your limited company.

Here, we will discuss how things will be done and how you should deal with them.
Navigate through the key sections of this guide

• Sole Trader or Limited Company: What’s the Difference?
• Should Every Sole Trader Consider Incorporation?
• Is incorporating my business good for my assets?
• Should I Value my Asset Myself?

Sole Trader or Limited Company: What’s the Difference?

There are many differences. For example, as a sole trader, you are the business, and HMRC sees you as the same legal entity. That means you can keep the profits after tax, use your account instead of a separate business account if you wish, and operate under your name if you want to.
Completing the tax returns is much simpler, but there are considerations. One of them is personal liability. As a sole trader, you are not responsible for what happens legally and financially within your business.

It’s very different for a limited company because they are observed as separate entities from their owners. You’ll have limited liability if you own your limited company, and your business debts aren’t yours.

Some important points to consider when transferring assets to a limited company are also listed.

Should Every Sole Trader Consider Incorporation?

• It’s entirely up to the sole trader whether he wants to incorporate your business or whether you prefer to remain a sole trader.
• You should also consider other things. For example, sole traders who have seen growth may want to be more tax efficient.
• There are things to think about first. For example, sole traders who’ve seen growth may find it more tax efficient, depending on their circumstances.
• Still, you’ll also have more tax reporting obligations and can no longer take money from your business as and when you please.

Is incorporating my business good for my assets?

Your limited company can impact both your personal and business assets. When you incorporate your business, it appears as a separate legal entity. That means your company debts can’t be your assets. So your car and home are protected if your company faces financial difficulty.
If you plan to transfer your business assets to a limited company, this can be beneficial as you can claim a Capital Allowance. This is a form of tax relief for businesses. It also means taking your profit out before paying the tax.

Business assets are the things you have and through which you can create value for your company. It can be anything from business premises, equipment, intellectual property or any vehicle you can use for business purposes.
You can also transfer your assets to a limited company. If you own any property, it’s best to speak with your accountant to know if your decision is correct.

Determine the Assets You Need to Transfer

Before making any transfer moves quickly, it is better to do some planning. The first thing you must consider is to identify the assets you would like to move over, like

• Business Premises
• Any equipment, computer or machinery
• Trademark and copyrights

Once you have identified your things, it is essential to discuss the list with your accountant so that you can start the transfer process. An expert accountant is necessary in this scenario to smooth all your transfers. Once your assets are transferred, you are no longer the owner of a limited company.

What are the Methods to Transfer Your Assets to a Limited Company?

There are two ways to transfer your assets to the limited company.
– Either by a sale to company
– Through placing credit on the director’s loan account

Transfer Assets to a Company Through Sale

A sale is where you can sell your assets to a limited company at the market value. By market value, we mean the price. It’d sell in the marketplace, so you will need to compare the cost of the market to similar products that have been sold in the market. The company will pay you then, which can be reflected in your accounts.
This option also means that you, as an individual, should pay Capital Gains Tax on your profit. That’s why you must charge your company with the exact price. So if you try to sell it for less than the actual amount, you want to avoid Capital Gains Tax.

What if You Have Recently Incorporated Your Limited Company
If you recently incorporated your limited company, you might not have the funds to purchase assets through the sale. So here, you can use a credit card on the director’s loan account, which means the company owes you money for the assets it owns.

If you recently incorporated your limited company, you might have the funds to purchase your assets through the sale.

Also, you can place a credit on your director’s loan account. That means the company owes you more money for the assets it owns. The credit will stay on the DLA so your company can repay you.

A DLA can also record the personal money you withdraw from your business that is not a salary, dividend or expense repayment.

Should I Value my Asset Myself?

You don’t have to do that. However, you may have expensive assets or complex intellectual property that is tricky to evaluate independently.
You don’t have to. You may have expensive assets or complex intellectual property that are too tricky to evaluate independently. In this instance, you can hire a professional to value your assets.

Do I need to change my client contracts when incorporating my company?

Your contracts regarding employees won’t change on their own. It’s good practice to inform every party regarding the new business structure and modify contracts where necessary. You have to update the documents, like invoices, the website, or other marketing materials.

Things You Should Consider

Before registering your new limited company, you should consider other things. If you have employees, you should issue new employment contracts that show your limited company as the employer and update the PAYE records accordingly. You should also review and update the insurance policies.

The most important one is to understand your tax obligations. You must send Company Tax Returns and pay Corporation Tax, but you must also submit the self-assessment. For example, suppose you pay dividends or own untaxable income outside the limited company. In that case, talking to an expert about the change is essential, as they will assist you with every step.