4 Implications converting sole proprietorship into a Pty (Ltd) Business

What is a 'Sole Proprietorship'

A sole proprietorship, also known as a sole trader or a proprietorship, is an unincorporated business with a single owner who pays personal income tax on profits earned from the business. With little government regulation, a sole proprietorship is the simplest business to set up or take apart, making sole proprietorships popular among individual self-contractors, consultants or small business owners. Many sole proprietors do business under their own names because creating a separate business or trade name isn't necessary

What is a Private 'Limited Company' Pty (Ltd)

A limited company is a form of incorporation that limits the amount of liability undertaken by the company's shareholders. It refers to a legal structure that ensures that the liability of company members or subscribers is limited to their stake in the company by way of investments or commitments. In a legal sense, a limited company is a person.

You want to convert your existing sole proprietorship into a Pty (Ltd). Explain what implications will this change of business form have fora) Your suppliers?b) Your customers?c) Your bank manager?d) Your government?

a) Your suppliers?
All supplier need to sign a new agreement with Pty (Ltd),
b) Your customers?
The contracts/service agreements/ leases signed under the sole proprietorship business will have to be novated or even re-signed under the new entity.

c) Your bank manager?

All banks accounts used for the sole-proprietorship need to be closed, and a new bank account(s) under the Private Limited company need to be opened. Naturally, all cheques and bank transfers need to be made in favour of the Private Limited company henceforth.

d) Your government?

All debts, including payments/fines owed to government bodies, must be settled before transferring the assets. A company must be registered with SARS as a provisional taxpayer and pay tax twice a year on estimated business profit.