Changing a Sole Prop to a (Pty) Ltd

[Incentive]

Thank you everyone. Greig has hit the nail on the head regarding the reason behind my question: Its for grant application. To qualify for the DTI's grants for manufacturers, the company must have some assets in its books.

So the best course would be:

Register the new PTY (LTD), move the manufacturing and other required assets from the sole prop to the new company whilst retaining the property the business is operating from, in the name of the sole prop. The Company can then rent the property from the original owner. As long as the rental amount is market related, the DTI won't have a problem with this. And this will remove costs involved with transfer duties and possibly capital gains tax.

[Greig Whitton]

Think very, very carefully before you register a new company and transfer any assets across if your sole reason for doing so is to apply for DTI grant funding since there are plenty of short- and long-term implications (and there is no guarantee that your grant application will be approved).

You are welcome to contact me directly if you would like to discuss this in detail and get an outsider's opinion (I've worked with a number of business owners on DTI grant applications - I assume you are applying for MCEP?)

[KristiKat]

Thanks guys for your kind assistance.

My main concern is regarding the moving of the assets currently in the name of the individual trading as the sole prop, over into the company, especially fixed assets. This would involve transfer duties, in the case of buildings? The sole prop will hold 100% in the company. To limit these costs, would it be best to only move the operational assets over into the new company, while renting the building from the sole prop?

And then, would the new company be able to carry on trading as a going concern, and use the financials of the sole prop as its historical financials?

I don't understand your question,

I mean THE CC cannot rent from the sole proprietorship if you are apt in changing it into the CC.

[KristiKat]

Thank you everyone. Greig has hit the nail on the head regarding the reason behind my question: Its for grant application. To qualify for the DTI's grants for manufacturers, the company must have some assets in its books.

So the best course would be:

Register the new PTY (LTD), move the manufacturing and other required assets from the sole prop to the new company whilst retaining the property the business is operating from, in the name of the sole prop. The Company can then rent the property from the original owner. As long as the rental amount is market related, the DTI won't have a problem with this. And this will remove costs involved with transfer duties and possibly capital gains tax.

THE CC cannot operate in the name of the sole proprietorship...so what you are trying to tell us that the CC will operate in the account of the SP?

You want to create A CC that exists apart from your separate estate?

If you say that the CC is going to be operated in the name of the SP then your estate will not be separate...

...and the debts incurred by the CC will then be at the risk of your own personal account.