Client incorporated business about 18 months ago but never got round to putting in place the new structure. They just continued to operate as a sole trader even after I gave them advice on what had to happen to get the company up and running and the information requirements for customers, payroll and suppliers etc.
I prepared a set of dormant accounts for the first year which need to be sent and eventually in the second year the client opened a company bank statement in July and some of the clients paid money into this account and some still into the original bank statement. The client is very disorganised and so technically started to trade from the company.
The problem that I have is that the client now wants the business to remain as a sole trader business as they now have information that if they change the type of business structure then they need to apply again for a full care inspectorate inspection and go through the full procedures again which may take six months.
To compound matters, they are ready to open a second business and have had inspection reports based on them being a limited company which alters ratios from staff / child. They want to use the incorporated business for this business and leave the existing business as a sole trader business.
Really not sure what I should advise:
a) Can I use the existing incorporated business for the new venture even with the fact that some money was sent from the sole trader business to a new company bank account which the client admits they shouldn't have remitted if they knew the strict inspection procedures. The money was transfered in July and the new company will be opening in September.
b) Can I get the bank to change the address of the bank statements and get the client to transfer the money back to the sole trader account.
c) Do I need to set up a new company for the second business.
d) Not sure if disincorporation is now an issue and if it is still alright to continue operating the first business as a sole trader
The client seems to have got into a bit of a muddle and now my head is a bit sore not sure the best approach, you advice is most welcome.
Replies (4)
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A bit of a muddle
You seem to be in as much of a muddle as your client. I am not sure that I would entrust my child to someone who "is very disorganised", but I will try to answer your questions, although I know nothing of the Scottish Care Inspectorate's procedures and requirements:
a) Yes - of course, you can use the existing limited company for the new business. Not sure what the problem is with "money was sent from the sole trader business to a new company bank account". The individual client is indivisible from the sole trader - it does not matter if they put money into their company from a sole trader business bank account or from a personal bank account.
b) No - only the client can get the bank to change the address on the bank account, but from what to what? I would have thought that the address would be the individual client's home address. I daresay you could persuade your client to transfer the money back from the company bank account to the sole trader account, but I don't see the point of doing it.
c) No
d) Yes
ratios??
There is absolutely no difference in staff/child ratios due to operating as a limited company. Whilst a childminder has different ratios to a childcare-provider, ratios don't change because of incorporation. Additionally, it won't take six months to reregister; as long as directors et al are the same as the original sole-trader(s), it's just a formality and shouldn't take more than a couple of weeks; a month tops.
Edit: This is the case in England (OFSTED). Although per http://www.nationalcarestandards.org/218.html in Scotland the factor seems to be whether premises are domestic or not; not if provider is incorporated.
Your repeated references to asking the bank to change to correspondence address associated with the account in their records makes me wonder whether you think that the effect of them doing so will be to change a company account into a personal account, or vice versa. It does not.