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Thread ID: 98073	2009-03-10 08:14:00	Running a company	george12 (7)	PC World Chat

Post ID	Timestamp	Content	User
755275	2009-03-10 20:14:00	George - I think you'll find that the IRD won't look kindly on you if you try to deregister for GST as a Sole Trader before selling the assets to your company. I suspect they will look on that action as tax evasion. You would have to wind up your sole trader business properly, which means getting accurate valuations of your assets so that your full tax liability (as a sole trader) is properly established. Like others above, I would strongly recommend getting professional advice - either from an accountant or the IRD itself...	johcar (6283)
755276	2009-03-10 21:05:00	I think you should try the IRD help if you don't want an accountant. Having said that, an accountant will be worth every penny to get it right. 1. You can sell your sole trader business to your company. That means a stocktake and current valuations to reach a price. 2. The sale would be of a continuing business and thus "a going concern". No GST to charge or pay, but you have to state both figures in the GST returns. You will need to de-register personally a couple of months after the sale. 3. The company will need an IRD number and to be registered for GST before you do anything. 4. You should look at the company being loss attributing. This is why you need an accountant for this technical stuff. However the IRD people may do the job. 5. No reason not to take drawings from the company but it's still wages. You are an employee of the company and its critically important you understand that. The company is a separate legal entity - it is not you. I think you don't appreciate the distinction because you have asked about still using your personal account. The company is separate. 6. You can lend the money to the company. Interest charged is up to you. Often nil, but you can choose the bank rate if you want. If there is interest, you'll have to pay tax on that personally even if you don't get paid. So its not simple. 7. The director(s) of the company need to make a resolution in writing to borrow the money and any interest. You also need resolutions to buy the business and any other company actions. 8. Yes you most definitely need a separate company bank account and that is where all your trading happens. Hope this helps. I'm not an accountant so.........	Winston001 (3612)
755277	2009-03-11 04:20:00	The company is a separate legal entity - it is not you . The company is [B]separate . Yes . Makes me wonder why someone other than a large corp would do it - being able to walk away and not be responsible when it all goes down the tubes . . . . . . . . . . Nasty .	pctek (84)
755278	2009-03-11 06:38:00	Some solid advice there from Winston and I agree with 95% of it. I don't recommend you set up your company as a loss attributing qualifying company (LAQC) for a number of reasons : a) you need to give a PG to the IRD as part of the process b) the tax benefit is dubious if your personal tax rate is less than the company tax rate, and c) when the company needs the start up losses to offset it's first year of profit, the losses aren't there to help ease the tax burden in the 1sr/2nd year of being profitable. The other thing to be aware of is not charging interest on loans. You end up with problems of 'deemed income' (in the principal includes a portion of income) if you don't charge interest unless you use a 'Marshall clause'. Worth looking into. There are a few ways of getting money out of a company: 1) wages (with PAYE deducted) 2) dividends (from tax paid profits) 3) drawings (provided you have a sufficient balance in your current account - you don;t want to overdraw this because there are FBT implications), and 4) shareholder salary (often an an annual adjustment by your accountant, this is income in your hands and deductible to the business but has not had PAYE deducted, but you will pay tax on it). Andrew	andrew93 (249)
755279	2009-03-11 08:33:00	Highly recommend calling the IRD, thats what they're there for. You'll bounce between a few departments with half answering each question, but they'll definitely be able to assist you! I got stung big-time by an accountant, so would also highly recommend you find out exactly what the fees are going to be too...	Chilling_Silence (9)
755280	2009-03-11 08:56:00	so would also highly recommend you find out exactly what the fees are going to be too... and what they are going to be for...	andrew93 (249)
755281	2009-03-11 09:59:00	Well I got charged $395 for them filing a PAYE & GST Return, except there was no PAYE, and I gave them the exact fields to put into the GST Return. Disgusting! Naturally I told them to take a hike when they sent me the bill...	Chilling_Silence (9)
755282	2009-03-12 01:08:00	Thanks for the excellent advice everybody (especially Winston) . Thankfully I do understand that the company and I are separate legal entities . If I didn't understand that sort of concept I wouldn't be trying to do this myself . I have already started the company so I have my IRD / GST number . I see they've cracked into 9 digits these days ;) . I considered an LAQC but don't think there's any advantage for me . I intend to pay myself wages to get money out of the company . I just didn't understand that my initial capital as a shareholder was able to be drawn on (as long as it's there of course, don't wanna get into interest free loans . . . ) . I will be lending any extra capital the company needs for stock purchases, which can be quite large at times, as I usually only need it for a month or so at most . Are there any disadvantages to having zero paid up capital, ie "initial capital"? I don't really think I need any, as the last couple of day's takings when deposited are enough for day to day expenses and any extra required I could lend to my company . But is there any reason to start with say $100 or $1000 initial capital contribution? That contribution seems to be a tax "hole" if I never draw it out again . Ie, contribute $1000, then pay tax on getting it back as wages or a dividend . . . My question regarding banking was not about the current account, obviously a current account in my name would be unacceptable . I meant that, say I had 5 grand sitting around in there that wasn't needed at the time, could I store the money in a personal savings account until it was needed . I'm not going to worry about that though, it's not really necessary, I just wanted to keep the number of bank accounts down . Obviously not worth the hassle though . After all, these days it hardly makes a difference if money is in an interest bearing account or not . . . One more question, do I have to sell the business, or can I just sell the stock? I don't have much right now and it's fairly easy stuff to value . If I do have to sell the business, is that taxable personal income, despite the fact that the stock is assets?	george12 (7)
755283	2009-03-12 02:10:00	Oh and thanks to everyone suggesting I call the IRD. They have been very helpful in the past so I'll give them a call.	george12 (7)
755284	2009-03-12 03:10:00	I don't run a "current account" . My contract income goes into an on-call account (high interest - ha! not now!) in the name of my company and I transfer 50% to my own cheque account (as drawings) . The rest sits earning interest waiting for GST and Provisional Tax payment dates . I don't have a lot of accounts to pay, so have no need for cheques - I either use my credit card or make a direct payment via the interweb if I find myself in that position .	johcar (6283)
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