Part of our complete guide to business structure.
Before you incorporate
If you haven't already decided incorporation is the right move, start with our sole trader vs limited company comparison, this article assumes you've made that decision and want the practical steps to actually do it.
The core steps
- Register the company with Companies House, choosing a name, registered office address, and at least one director and shareholder
- Register for Corporation Tax with HMRC within 3 months of starting to trade
- Open a business bank account in the company's name, a limited company is a separate legal entity and its money must stay separate from yours personally
- Tell HMRC you've stopped being self-employed, and file a final self assessment return covering your sole trader income up to the switch date
- Set up payroll if you'll pay yourself a salary as a director, see our payroll service
- Register for VAT if applicable, your sole trader VAT registration doesn't automatically transfer, see our VAT threshold guide
Telling your clients and suppliers
Contracts and ongoing arrangements don't transfer automatically. You need to actively tell clients and suppliers you're now trading as the limited company, and issue new invoices under the company's name and bank details, not your old sole trader details.
Key point: Keep a clear cut-off date. Income and expenses before that date belong to your final sole trader self assessment return, everything after belongs to the company. Mixing the two makes both records harder to untangle later.
Existing assets and equipment
Equipment, vehicles, or other assets you already own as a sole trader can be transferred into the company, but this can trigger a Capital Gains Tax disposal, sometimes relieved by incorporation relief depending on the circumstances, see our note on incorporation relief. It's worth getting this reviewed before the transfer, the tax treatment can differ significantly depending on how it's structured.
Ready to incorporate? Book a free consultation and we'll handle the company formation, HMRC registrations, and the transition from your sole trader records, properly sequenced so nothing falls through the gap.
Frequently asked questions
Do I need to close my sole trader business first?
You tell HMRC you've stopped being self-employed from the date you incorporate, and file a final self assessment covering the sole trader period, you don't need to formally wind anything down beforehand.
What happens to my existing contracts and invoices?
Contracts don't automatically transfer, clients and suppliers need to be told you're now trading as the limited company, and new invoices should be issued from the company, not your old sole trader name.
Do I need a new business bank account?
Yes, a limited company is a separate legal entity and must have its own business bank account, you cannot keep using your sole trader account for company money.
What about assets I already own, like equipment or a van?
These can be transferred into the company, sometimes triggering a Capital Gains Tax point depending on the asset and whether incorporation relief applies, this is worth getting advice on before the transfer, not after.