Sole trader to company

Incorporating an existing business. A transfer, with tax consequences.

What it means

Incorporation transfers the trade and assets of a sole trader or partnership into a limited company.

Why it matters

It changes liability, tax and administration. The decision turns on profit level, risk, and whether profits are being retained or drawn.

What it looks like in practice

Incorporation relief or holdover relief can defer capital gains on the transfer. Goodwill on incorporation has restricted relief.\n\nThe business must be genuinely transferred — contracts, employees under TUPE, bank accounts, licences and registrations.

What to watch out for

Assuming a company is always better. Below a certain profit level the saving is small and the extra cost and administration may exceed it.

Where to get proper advice

Your accountant. Review the question annually rather than deciding once.