If you've been trading as a sole trader or partnership, and you decide to "incorporate" your business (turn it into a limited company), you'll need a new FreeAgent account. Here's why.
When you incorporate your business, you're creating a new legal entity. A limited company has a legal identity in its own right.
For example, if you don't pay a supplier and the supplier sues your business, when you're a sole trader, he's suing you because there's no legal difference between you and your business.
But when your business is a limited company, he's suing the company, not you individually. Unless you've given personal guarantees of course.
So what does that mean?
You'll need to set up a new FreeAgent account for your company, because it's a new business.
To make the transfer easier, you can export your contacts from your sole trader account and import them into your limited company account.
And once you've set up your limited company account on FreeAgent, you would need to drop us an e-mail at email@example.com so we can mark your account as read-only. You'll still be able to see all your data but you won't be able to make any changes to it. This means that you won't have to pay twice for what is effectively (though not legally) the same business.
For example, you may need to show your data to HM Revenue or your accountant so that they can fill in your tax returns.
What about opening balances?
Because your company is a new business, all its opening balances will be £nil. If, for example, customers owed your sole trade or partnership money at the point where you incorporated, that money is due to you as a sole trader or to the partnership, not to the limited company, so you wouldn't put in an opening balance in the company for money owed by your customers (trade debtors).
Using the same VAT number?
If the new company is taking over the same VAT number, the new ‘Effective Date of VAT Registration’ will also be the new ‘Company Start Date’ which is found under ‘Accounting Dates’ in your ‘Settings’.
Also, the ‘First VAT Return Period End Date’ must be after the new ‘Effective Date of VAT Registration’ date. This is usually either the end of the month or following three months.