Switch between a sole trader, partnership, unincorporated landlord or limited company account
This article explains why you need a new FreeAgent account if your business type changes.
If you've been trading as a sole trader and then become a partnership, or if you decide to ’incorporate’ your business (turn it into a limited company), you'll need to set up a new FreeAgent account because it's a new business.
If you’ve set up the wrong FreeAgent account type in error, for example if you’ve set up a sole trader account but need an unincorporated landlord account to submit property income and expenses to HMRC for MTD for Income Tax, find out how to switch from a sole trader to a landlord account.
Why do you need to set up a new FreeAgent account?
When you change the business type to become a partnership or 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, they're suing you because there's no legal difference between you and your business.
However, when your business is a limited company, they're suing the company, not you individually, unless you've given personal guarantees.
Setting up a new account
Before you set up a new account, you may want to check that FreeAgent supports the filing requirements you need. Learn more about the type of accounts that FreeAgent supports filing for and what you can file using FreeAgent.
You can have one free FreeAgent account for each NatWest, Royal Bank of Scotland, Ulster Bank or Mettle account that you hold, as long as you meet the eligibility criteria detailed here (otherwise FreeAgent fees will apply). Optional add-ons may be chargeable from each account.
To make the transfer easier, you can export your contacts from your original account and import them into your new account.
Opening balances
Because it's a new business, all the opening balances on the new account will be £nil.
For example, if 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 an opening balance in for the new company for money owed by your customers (trade debtors).
VAT Registration number
If the new business is taking over the same VAT number, the new ‘Effective Date of VAT Registration’ will also be the same as 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 the following three months, depending on how frequently your new business will be submitting VAT returns.
Making original account read-only
Once you've set up your new account on FreeAgent, please contact our support team by selecting the blue Help button at the bottom of the screen and asking to speak to the support team, so we can mark your original 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.