Home – New Forums Starting your journey Can I incorporate from a sole trader?

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  • #987735
    Beany
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    Hiya,

    I have been working as a sole trader, but would like to create a company so that I can get some of the benefits of a pty ltd.

    Not sure how this works, but can I keep my current abn and registered name, and just incorporate?

    Or will I have to create new ones?

    Thanks.

    #1164120
    MissSassy
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    You are best to speak to your accountant as they know your circumstances and can set it all up correctly for you.

    #1164121
    arrowwise
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    Speak to an expert, however if you are changing the legal entity you are trading from then you will most likely need to register a new ABN and open a new bank account.

    #1164122
    Greg Mawer
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    You need different a different ABN (as well as an ACN and TFN).

    Your accountant will advise you of this during the setup and attend to this for you.

    Regards,

    #1164123
    Bronwyn Baird
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    Hi

    You can cerainly change from sole trader to corporate entity, however you will need to change your ABN and TFN as you will have a separate legal entity.

    thanks

    #1164124
    Carl Desacola
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    Hi Beany,

    It is easy enough to change from a sole trader to a company. In fact, it is actually a very common practice among small business operators.

    You just need to understand that, from a legal perspective, you are actually doing two separate things here:

    1. You are incorporating a new company;

    2. You are transferring your business from yourself (as sole trader) to the newly formed company.

    Let us briefly look at the implications of each:

    (1) When you incorporate a new company, the company will be allocated an Australian Company Number (ACN). The company will then need to apply for its own ABN and TFN and, if appropriate, GST. You cannot use your personal ABN and TFN for the company’s operations. Also, if the company is going to have employees, then you will need to consider registering for FBT and handling superannuation obligations with the company as employer.

    The company will need to operate under its own bank account(s).

    As a side note, you may also wish to speak to your accountant about the desirability of operating under a corporate trustee structure in your particular case as a tax management (and asset protection) exercise.

    (2) When you transfer your business from sole trader to the company, there will be a process you will need to follow with ASIC to transfer ownership of the business name into the company: http://www.asic.gov.au/asic/asic.nsf/byheadline/Before+you+start+-+transfer?openDocument

    Note that there may also be stamp duty implications for transferring the assets of your sole tradership to the company. The rules vary from State to State so check with your solicitor / accountant in your State (or Territory) to determine whether or not this will be an issue for you.

    Hope this has been helpful.

    Kind regards,

    Carl Desacola, Lawyer & Registered Migration Agent (MARN 1461661)
    Winthrop Mason | Business Lawyers & Migration Agents
    http://www.winthropmason.com.au

    #1164125
    Beany
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    Thank you all so much for the great input, its been invaluable!

    #1164126
    Solo_Again
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    Beany, post: 189872 wrote:
    Hiya,

    I have been working as a sole trader, but would like to create a company so that I can get some of the benefits of a pty ltd.

    Not sure how this works, but can I keep my current abn and registered name, and just incorporate?

    Or will I have to create new ones?

    Thanks.

    Hello Beany,
    I did move from a Sole Trader to a Company some years ago. As well as the practical issues already suggested, make sure that you ask your accountant about how captital gains tax affects the “sale” of your business to the company. Also you would already have a number of years in business. If you have more than 10 (?) years if you sold your business there is no captital gains tax on the sale (?). If you are close to the 10 years you maybe better using the company to operate the business until the 10years is up then sell it to the Company. Above all ask a good Tax accountant.

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