Hi
I've just met with a potential new client who has profits in the region of £140K, shared 50/50 with his wife. We talked briefly about the pros and cons of incorporating to an ltd and he seemed quite interested in looking into this options in the future. Whilst I'm happy with acting for the ltd, I'm afraid my knowledge falls down a bit on the actualy incorporation of the business side of things and I was hoping for some advice. Details are as follows:
Property 185,000
Equipment 112,000
Vehicles 14,000
Debtors 95,000
Cash 1,500
Creditors 5,000
VAT 21,000
Loans 214,500 (Including a loan on business premises)
Under S162 I must bring over all assets of the business, so the property, equipment and vehicles, what about the debtors? Also, what about the related loan on the property? How is this accounted for? Is it wise to bring in a property into a company given the potential for "double tax" on the eventual sale of the company (the client has indicated this is something he is interested in the in the 5-10 years)
If the property is left out of the company, then we can use S165 to hold over the gain instead on the goodwill ( as he is a potential I not looked into goodwill valuations yet, I just want to get my thinking straight first) but lets say is £25k.
Also can you confirm what my double entry journals would be under both scenarios, if say we set the company up with 100 shares issued equally between husband and wife.
I realise this is something I should be up to date on but its been such a long time I just want to ensure my thinking is correct.
Thanks
Replies (5)
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I too have a couple of clients who would benefit from incorporation. I too lack experience in the 'nitty gritty' of an incorporation process but I would advise that you get hold of this book:- Incorporating a business by Roger H Jones (3rd edition). Its great there are a series of checklists regarding the incorporation process.
Looking at your post you have not mentioned the valuation of goodwill to be transferred. A very specialist subject and probably best to obtain a professional valuation.
No doubt there will be a follow of helpful tips and comments from the experienced AW members but the book is well worth getting hold of.