How to change from sole trader to limited company?

In this article, we'll show you how to change from sole traders to companies and protect your personal property by reducing liability. We'll also elaborate more on what a trader needs to stop being self-employed and become a registered company.

Main considerations for opening limited companies

The UK is a known hub for efficient and fast-growing ventures. Opening a business in the UK has lots of benefits, especially for a registered trader. Like with most nations, a new trader can enjoy lots of tax incentives while offering your accounting service.

The UK government knows that most companies don't make profits when starting. Therefore, they don't impose a tax penalty on them for not filing their tax until they start making profits. So you may not have to pay taxes until your venture starts to make profits.

When expanding your business, you should always go for limited companies. To change from a self employed trader to a new UK-based limited business, non-residents require the following:

Main requirements

Non-residents and residents have similar requirements. For instance, the new offices must correspond to where the firm will be based.

Address registration

Every non-resident planning on opening new businesses requires a physical address in the country. The address registration will be included in the public register. The HMRC will use this address to contact you.

To save time, foreigners don't have to visit the UK to register a new personal address. Instead, they can pay for one for about £40 per year. Your directors can pay £1.78 per week for virtual addresses.

Company registration

The foreigners must provide a certain set of data when registering a limited venture. Some of these details include:

• A new business name
• Shareholders
• Director
• You can include the list of directors when you make the Memorandum of association.

Changing from sole trader to limited company

If you have already invested in the UK, you have most of the above requirements. Plus, the UK is the best place to convert your business to a new limited company.

Before converting your businesses into companies, you should consult a financial advisor or personal accountant for advice. When changing your business to a new company, a consultant will help you save time thanks to the service they offer.

Pick the best business name

Start with coming up with a business name. You can also continue using the same name that you traded with as a sole proprietor. A business name checker can help you confirm if the name is available.

While confirming if the new name is available, you should ensure that it meets the following requirements:

• It must end with LTD.
• You shouldn't copy an existing registered business name.
• The business name shouldn't be offensive.

Register with the UK companies house

After creating your business name, you can finally register the new venture. You can contact company formation agents for help or try free self-registration. Fortunately, the legal process of registering companies can be quite easy.

When registering, you'll need the following details:

• At least one shareholder
• Registered business name
• one director
• Registered office address
• SIC code (Standard Industrial Classification)

As a non-resident, you can use a virtual director's address.

Inform the HMRC of the change in the structure

After registering the business, you can inform the HMRC that you are no longer a sole trader. Basically, you need to fill out a simple form online with these details:

• Legal virtual address
• The date when your business stopped operating
• Your Name

Remember, unlike a sole trader, you won't necessarily need to have the National Insurance number to pay tax. Plus, you'll need to submit your tax returns and your employee's income tax; this will include the VAT on the service offered.

But a sole proprietor requires a National Insurance number and bank account to open a venture.

Open a business bank account

After registering with the HRMC, you don't necessarily have to do anything else. But it's always ideal to open a bank account. Remember, a business bank account isn't mandatory when registering your venture. Setting up a business bank account will help you save time by keeping your personal and other finances separate.

When opening a business bank account, you'll need a legal passport or any legal ID. You can pick a UK bank that offers international accounts or use their virtual office address to open a bank account.

Conclusion

Limited companies have several benefits for small businesses. Therefore, most investors are upgrading their ventures to enjoy the tax benefits. Registering one is quite easy; all you need is a unique name, directors, and the Memorandum of Association. After getting the necessary documents, you can consult for help or register the limited business yourself.