Can you change from sole trader to limited company?

G

Gemini76

Guest
I'm trading as a sole trader for the last 4 years and on the verge of closing, I have lots of loans, 3 in my personal name and 2 on my house with my sister (between these and the mortgage this house is in negative equity). I owe the revenue and the rates money. I have a lease on my retail unit. I am so so stressed out with the worry of everything, I can't pay the current costs never mind all the arrears I owe. My accountant is not repsonding to me and I don't know where to turn to. I tried MABS but they only deal with people with personal problems. Someone suggested opening a limited company and transferring all loans and debts into it but I am not sure this is possible, does anyone know if it is and what gain I would have from this? I don't want to just give up but I also think there is a point where you have to realise that enough is enough but I don't feel I am qualified to make that decision. Sorry for such a long post and any advice on where I can turn to would be so much appreciated.
 
Pointless in starting up a limited company now. You need to run the figures and see if this business is viable or should be wound up. Either way, the liabilities will settle on you and that is why you should have being trading in a limited structure (the bank loan / credit card would still have probably required a personal guarantee).

Is the accountant owed money or is there any reason why he is not responding to you? You really need someone to run the figures for you if you are not competent yourself. What will the accountant charge you for this work? Maybe the cost benefit is not worth it, maybe deep down you know this business is at a deadend but you just want someone to say it.

BTW - it's not called giving up, it's called facing upto the facts. Look at the stress and personal debt that this business has brough upon you. What chance of realistically turning this around?

Then maybe its a very profitable business but your drawings are unrealistic for it. This would result in not being able to meet its liabilities to Revenue and local authorities. Which is it?
 
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Any loans and debts you transfer into the company will need to be paid for by the company, so while you may get some protection from it, you'll still need to find the money somewhere. Additionally, the Ts&Cs of your loans may preclude a transfer.
 
Yes I know now I should have had a limited company all along, that reassures me a little that bank loans and credit cards would have wanted a personal guarantor too as these are the main debts I have, the revenue and rates I am paying to try get them off my back. The accountant is a friend of the family who is paid but this is when its an awkward situation. I am going to email again and see if I can get some meeting or something set up, he just says its not that bad, but on a day to day, week to week basis it is, I can't pay anything. Thanks for the replies.
 
I don't care who he is, get rid of him and get someone else (politely of course) who can help.

Just do it, thank him for his service thus far and move on quickly.
 
Ok and do I just request all my accounts from him or leave that to someone new? Anyone got someone they can recommend, I am in the Dublin South area?
 
Does he hold anything belonging to you? If so, I would call over and get that. Leave the other stuff to the new accountants. Please make sure he has done everything he has been paid for to date i.e. revenue returns, etc. Have you access to ROS/CRO? I would check them.
 
What line of business are you in?
Have you completed a budget recently? I.e. simple cash in/cash out basis. An accountant will not assist you in generating cash. Realistically you need to complete a budget. If the cash out exceeds the cash in you then need to look at your'e options. Either increase income (unlikely) or cut back on expenditure. It won't necessarily solve your problems but at least it will give you the basis for finding a solution.
 
Don't centre this on your accounts per se.
Think of them as a valuable source of information.
They are also a legal obligation and a means of calculating taxes.
But the information the accounts contain, there is the real gold in your firm.
You need to conduct a basic analysis of your firm to see where your profits are gone.

You need to look at firms in the same industry both who are surviving and who are going under and do some comparative studies using some basic ratios.
If you're not up to doing this you may need the services of a financial advisor as opposed to an accountant, and very probably a business consultant.
If you do thins and it confirms your worst fears, you're no worse off.
If however you do this and it shines a light on a possible means of improving your situation, you may stop your business going under.

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As a sole trader it can be hard to see where the business stops and the private spending starts, so I'm going to wander a little here because for a small sole trader private spending can crucify your finances.

You need to get beyond your accounts fiasco and take a hard look at your business, see what its USP is, where its largest overheads are coming from and how you can decrease all its cost centres, while maintaining market share.
In a challenging business environment like the one we are now in, its easier to increase profits through making savings than increasing sales.

Business Premises Lease or Mortgage.

Are you tied into an upwards only rent review?
Can your business be successfully run from your home or garage?
Unless you're meeting people all the time in your premises consider relocating to chez vous, and meeting people in a nearby hotel.
You'll be able to hire out rooms for very little, sometimes deals allow this for free, for extended meetings or just meeting in the foyer.
Choose Buswells if you want to give the impression that you're politically well-connected, or the Four Seasons if you just want to see filthy rich - you can afford either with what you'll save on your lease

Amalgamating loans, negotiating better terms, even if only over a short term, pruning ALL NON-ESSENTIAL SPENDING - both personal and business can save you thousands of Euro per annum.

Food.

Its possible for most people to halve your weekly spend on groceries in money terms. This shouldn't resulted in any health problems and you won't miss meals and you can still afford the occasional treats. You simply buy according to the bargain of the week.

A family of four should be able to live well on €125 a week. That's €6500. I know several families of four that spend a multiple of this. So in one fell swoop you can ad an extra €5-10K into the pot.

Transport.

The next thing is the ego boost that is your car. Do you need a second car for your work? Why not put it off the road and commute using public transport? Unless this is already a diesel you will recoup most of your travel expenses on the tax saved alone.
Better still, cycle into the office and encourage your staff to do likewise. Combine this with the next section and you'll live longer and healthier, assuming you don't fall off your bike.

Expensive Bad Habits

Do you drink and smoke?
Give the cigarettes up! They are totally useless things!
What are you lorrying your money into the government coffers at that rate for?!

As for the drink, it doesn't matter where you do it, its a total rip off.
€4.00 for even the cheapest pint - but shop around there are €2 and €3 bargains.

Giving up drink and booze [and drugs if your'e that way inclined] will release up to 20% of your nett take home pay.

Eating Out

Do you eat out or get take-aways?
Learn to cook properly at home - you will eat better for less and bigger portions expertly cooked.
Letting others cook for you is a luxury no-one can afford on a regular basis these days.

Personal Grooming

Beauty treatments and hair styles every week for you/your spouse.
No more - the windswept look is *in*!

Besides there will be a huge dividend health-wise if you give up the drink and cigarettes.
Use gentle soap and a deep cleanser regularly and your skin will look ten years younger.

Clothes

Nope. "No more shoes dahlink, yes you can try to divorce me over this..."
Clothes for growing kids only and no Nike-made-in-a-sweatshop-for-buttons buys either.
Past time your kids developed some character and learned what being fashionable and cool really means. Its about finding your own style and looking good on a budget, not worshipping the ground Harvey Nichols or Brown Thomas was built on.

What else?

The TV

The SKY box - cancel the subscription for all your "Must Have" channels.
You are going out of business - you don't have time to be sitting watching TV.
Let your wife and kids take up evening classes in cookery and join a book club!
You could save €240 - €1,000 a year, depending on your existing subscription.

"But I NEED my TV!!!"
Yes you do diddums, and you shall have it.
So long as you've kept the contract for a year, SKY allow you keep the dish and the box and the free-to-air channels - for free!

BBC1, BBC2, CBBC, SKY, CNN, Al-Jazeera, RT (Russia), 4 Movie Channels [315, 316, 320 and 321 I think] plus 229 and 230 and the Travel Channel.
More than enough to argue over.

Phones and Broadband

Look for deals from all the major providers.
You should be able to get broadband with unlimited local and national calls for €50 a month.
If you've moved home you don't need a business line or a fax anymore.
Nobody uses faxes now and a business line costs around €100 a month - A MONTH!!!
Take out two business lines and replace them with a private single land line in the home and you save €150 PER MONTH!!! That's another €1800 per year off the overheads.
Broadband deals are now 8Mb for this amount and yes, I know that its really 4Mb but its still vastly more than most businesses need.


School Fees.

There is no stigma to being sought in state schools at any level and no real diminution of service.
The only serious disruption is to friendship circles and self esteem, but you might find when you ask around (unobtrusively) that you're not the only one finding it difficult to maintain fee payments.
Its important you look at all the issues above to put this one into perspective.
Then decide on your priorities.

Summary

There is one underlying piece of advice to all of this - MAKE A LIST!

Lists are vastly underrated means of dealing with problems, prioritizing and checking the work is done.
A piece of paper and a pencil is all the project management software you are likely to need for this exercise, but feel free to use Notepad if you REALLY must! LOL!

I suspect from the tone and content of your first post that you may not have done this exercise yet.
You may not have the bent for it and in fact you might be surprised that your spouse can help you out there.
Women can multi-task far better than most men - I can only rapidly switch tasks myself as a sort of multi-tasking emulator.
Do not be afraid to ask your spouse for support in all of this and involve your kids in the decision making process about what to cut down on.
They all have to OWN this exercise or it will not work.

Because if you have kids and they're in private school, who will pay their fees if this cost-cutting exercise does not bear fruit?
That's probably the final cut and may be the bitterest to bear for all concerned.
HINT: shoes and cars should be at the bottom of the list.

Hope this helps.

ONQ.