Bungled incorporations
As a forensic accountant specialising in criminal cases, I see the results of bungled incorporations. In many cases limited companies are found to have wholly inadequate accounting records, are sometimes operated through bank accounts held in the names of the director(s) personally, have the use of personal credit cards to make company purchases, and even have on their Balance Sheets properties owned personally.
In one recent case, a company went into liquidation leaving numerous customers who had paid four-figure sums for goods which were never delivered. A police investigation into alleged fraudulent trading revealed that the directors' personal credit card statement balances were routinely paid off by cheques drawn from the company bank account. Those credit cards had been used to pay for goods purchased by the company and for the directors' supermarket shopping and foreign holidays. The company's accounting records were virtually non-existent although turnover exceeded £1 million. It was a nightmare trying to resolve whether the directors had improperly withdrawn funds from the company or actually had introduced more funds into the company than they had withdrawn!
So my plea would be - if you are advising a client to incorporate his business do ensure that the client understands the implications of incorporation!
Company Incorporation
I usually try to disabuse my clients when they say "should I be Limited?" for exactly this reason. Most small traders simply do not understand HOW incorporation differs from being a sole trader.
I load my fees for newly incorporated small companies in anticipation of this...