Sole Trader / Vat Question

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ohtwo

Registered User
Messages
48
Hi,

This is a bit of a mix of questions so hopefully they'll make sense.

I'm forming a limited company at the moment and the documents have been sent to CRO for formation.

I expect to begin trading in early September, but have been advised by an accountant to begin trading as a sole trader. The reason for this is because I'd expect to make a loss in the first 4 months due to startup costs, and could offset that loss, as a sole trader, against my income from my full-time job.

Then apparently I can begin trading as a limited company next year with no problems. Also I was advised to register the trading name as a sole trader and 'sell it on' to my limited company when the time comes to trade under the company.

First of all I'm not sure if this is the correct way of doing this. Because it came from an accountant I'm presuming its all above board.

Secondly, I have to go ahead and sign a lease for a premises shortly.
If the above is all above board, I'm now not sure whether to sign the lease under my sole trader or limited company name.

I need to have a VAT number so that I dont pay VAT on the lease. So now whilst I'm almost over the line for my start-up, this has added more confusion for me!

If it all makes sense, any help would be greatly appreciated!!

Thanks
 
ohtwo said:
...
I expect to begin trading in early September, but have been advised by an accountant to begin trading as a sole trader. The reason for this is because I'd expect to make a loss in the first 4 months due to startup costs, and could offset that loss, as a sole trader, against my income from my full-time job.
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Not sure on this aspect but it seems plausable. However, I also thought you can carry forward loses to the next year as a Ltd. Co. as well?
ohtwo said:
...Also I was advised to register the trading name as a sole trader and 'sell it on' to my limited company when the time comes to trade under the company.
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I don't think this is an option. Registering a trading name gives you absolutely no protection whatsover. Your Ltd. Co. could easily register the same name once set-up and there would be no objections so you could not justify a 'sale' of trading name.
ohtwo said:
First of all I'm not sure if this is the correct way of doing this. Because it came from an accountant I'm presuming its all above board.
Click to expand...
While most accountants would be above board, as with all professions there will be cowboys so tread carefully. Don't assume anything.
ohtwo said:
Secondly, I have to go ahead and sign a lease for a premises shortly.
If the above is all above board, I'm now not sure whether to sign the lease under my sole trader or limited company name.
Click to expand...
Again, I'm not well up on leasing premises but I would imagine that it might not be the wisest move to sign into a lease as a Sole Trader as it leaves you very exposed. As for what trading name to use, you can use whatever trading name you are going to be doing business under, as it can be registered to you as a Sole Trader or Ltd. Co. (whatever route you decide to take) so makes no difference really. I would imagine it would all boil down to 'who' is signing the lease, ie: you, or your Ltd. Co.?
ohtwo said:
I need to have a VAT number so that I dont pay VAT on the lease.
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Did you elect to register for VAT while forming the Ltd. Co.? This can be done for either Sole Trader or Ltd. Co.
ohtwo said:
So now whilst I'm almost over the line for my start-up, this has added more confusion for me!
Click to expand...
Ask your accountant to explain things in plain English, and maybe mention that you are getting conflicting reports from those you have discussed it with and wait for his answer. If you're unhappy with it, or still confused, seek another accountant.

My advice... if you are expecting to make a loss in the first few months/first year, and intend taking out a lease on a premises, then it might be best to set-up the Ltd. Co. from the start.
 
ButtermilkJa said:
Did you elect to register for VAT while forming the Ltd. Co.?
Click to expand...

Thanks for your response.

once my documents are returned to me with a company number i'll then register for VAT.
my understanding was that if I decided to trade as a sole trader initially, then I would register for VAT as a sole trader but not as a limited company until such time as I began trading under the company name.

either way it's probably best to sign the lease as the limited company!
 
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