1. Introduction
Both at the time of opening a new business and during the activity of an existing business, the question arises as to whether it is worthwhile to transfer and how to transfer to the activity through a limited company. The purpose of this guide is to elaborate on the stages of opening a company.
2. Basic Stages in opening a limited company
- Preliminary stage — the Registrar of Companies and the opening of a bank account:
Contact a lawyer who will register the company with the Registrar of Companies. The cost of setting up a company is a registration fee to the Registrar of Companies with the addition of legal fees. After the establishment of the company, the attorney must receive the documents and contact the bank in order to open a bank account for the company. If necessary we can refer you to attorneys who can provide you with the said service.
- First Stage — Value Added Tax:
Since the registration for VAT must be made prior to the commencement of the business activity, the first stage in opening a company is to contact the regional VAT office, which will include a declaration regarding the expected return of the transactions for the calendar year, at the end of the VAT process, the company will be issued a certificate of «authorized dealer.» After you pass on the required documents (see link to the complete list of documents required in the guide), we will contact you with you the VAT authorities and we will open a VAT file for you.
- Second Stage — Income Tax:
The regional tax assessor must be notified of the opening of the business or the commencement of occupation of the trade no later than the date of commencement of the business. Therefore, we will contact you with the necessary documents that you will forward to us and inform the tax assessor about opening the business.
- Third Stage — Income Tax Deductions and National Insurance Institute:
If the company employs employees, it is necessary to open a deductions file for income tax and National Insurance. There is no need to go to the National Insurance offices, since the opening of the income tax file also constitutes the opening of a file in the National Insurance Institute.
After opening the file, the National Insurance Institute will send a form to update details for the company’s sake to be filled out and sent back to the National Insurance Institute.
For your convenience, a letter is attached as a link and an appendix to this guide, which summarizes all the documents that must be submitted to our office for the purpose of opening a limited company.
Since we are connected to the tax authority, VAT and National Insurance Institute, we can shorten the process and help you from our experience when opening the company.
3. Additional instructions when moving from self-employed to operations as a company
When opening a company, especially in the transition from self-employed activity to a limited company, the following issues should be considered:
- Conversion of agreements with customers / service providers, suppliers, etc., to agreements with the Company.
- Transition issues of employees.
- Change of status from self-employed to salaried employee: from the point of view of insurance companies and / or advanced training and pension funds.
- Sale of fixed assets including vehicles, furniture and equipment to the Company. In this context —
- An invoice must be issued in the independent business to the Company Ltd., for the sale of the Company’s fixed assets to the Company
- To accept the payment of the transaction tax of the business as an independent — by issuing a «self invoice».
- Section 104 of the Income Tax Ordinance, which allows tax-free transfer of assets, may be used in exchange for allotment of shares to the transferor (the owner of the independent business). An income notice must be submitted to the Income Tax Authority regarding the transfer of assets from person to company. In the event that it is decided to take advantage of Section 104 of the MACHA Ordinance — the transfer of the activity is exempt from tax, the sale is subject to zero VAT.
- It is also possible to make a regular sale of assets from the individual to the company, which will be liable for capital gains tax. If the individual has capital losses transferred to offset, he can offset against the capital gain that will be created in the sale.
- In addition, there are additional considerations that need to be considered (see the detailed circular at the bottom of the page).
- Selling Reputation.
- If you have moved from an independent activity to an activity as a limited company, the closing of the independent business files must be done at the tax authorities’ offices.
- Transition period: It should be taken into account that there will be a period in which the independent business and the company will operate concurrently. We recommend that we try to reduce the transition period in which the independent business and the company work concurrently.
Our firm is well experienced and experienced in dealing with these issues and considerations — we will be happy to assist you in the process by taking advantage of the tax benefits and reaching an optimal result in a tax-free manner while fully complying with the requirements of the law.
4. Additional Information:
Read the full guide of our firm: Opening a company guide and moving from activity as an independent to activity as a company
Read the appendix regarding the documents to be transferred to our office for the purpose of opening a limited company
Read the comparison guide between Independent and Limited Company
