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Transferring the balance sheet from a sole trade on incorporation.

Transferring the balance sheet from a sole...

Could someone please share their treatment of this in the Limited company. 

For example, assume the sole trader balance sheet at cessation; shows VAT, fixed assets, bank accounts, and accruals, are these balances brought into the Limited company via the director's loan account even if they weren't generated by the Limited company?  


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21st Dec 2012 12:10


You just bring in the assets that the company has bought, i.e. the stocks, equipment, etc - debit asset account, credit directors loan account and/or share capital.

Other assets & liabilities, such as debtors, creditors, sole trader bank account, sole trader loans, etc., are left behind to be settled outside the limited company.  If any of these are settled via the limited company, they should be posted to the directors loan account.


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21st Dec 2012 22:43

My experience with a number of incorporated clients is that ultimately all the 'other assets and liabilities' will be paid/received by NewCo so in practice the entire balance sheet will be transferred to NewCo too with a global credit to directors loan account in respect of goodwill.
Check any business transfer agreement if one was drafted, if not then go through the balance sheet with the client and see if there was anything that he intended to leave behind.
I would agree with Ken that any sole trader loans/finance should not be incorporated unless they were correctly novated to NewCo.

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30th Dec 2012 09:17

trf on incorporation

It could be very tricky to transfer debtors to Ltd co unless the previous business was called XYZ and the company is XYZ Ltd.  Receiving payments from a different payor could also be confusing for suppliers.

Best if you discuss it the client.

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