Switching from sole trader to a company

Once the decision to incorporate is made (the structure guide covers whether and when), the switch itself is a sequence of small administrative moves. Most of them exist because of one fact: the company is a new legal person, not a renamed version of you. Everything attached to you as a sole trader either ends, transfers, or gets recreated in the company's name. This guide walks through that sequence.

1. Incorporate, and register for tax in the same pass

The company is created through the Companies Office online, around $130 plus GST all up. You reserve the name, then file the incorporation with director and shareholder consents. The step people miss is that the same online process can apply for the company's IRD number and its GST registration at once, so the new entity arrives ready for tax. The company's IRD number is separate from yours, and your personal one carries on for your personal return.

2. Wind down the sole-trader tax position

• GST doesn't transfer. Your sole-trader GST registration is cancelled in myIR, with a final return covering up to the cancellation date. The company charges GST under its own number from its own registration date. Line these up so there is no gap during which invoices go out with the wrong GST number, or none at all.
• Your last sole-trader return still happens. The income you earned before the switch is returned as self-employed income as usual, with provisional tax and terminal tax playing out on the normal calendar for that final period.
• Tell ACC you've stopped trading as self-employed, so levies follow the income to the right entity instead of billing you twice.

3. Re-paper the business

Everything that names you as the contracting party needs the company's name instead:

• Client contracts. Existing contracts are with you personally; clients need to agree to the company taking them over (or new contracts signed with the company). Most clients are used to this; larger ones will have a process for it.
• Bank accounts. The company needs its own accounts. From the switch date, business income lands there, never in your personal accounts.
• Invoices. New name, new GST number, new bank account: the invoice requirements all still apply, now with the company's details.
• Insurance, subscriptions, and assets. Business assets moving into the company are a transaction with tax consequences, and the values you use matter. This is one of the places an accountant earns the fee.

4. Learn the habits a company requires

The habits that were optional as a sole trader become structural:

• The company's money is not your money. You take money out as shareholder salary, taxed at your personal rates, or it is tracked as a loan through the shareholder current account. Casual withdrawals create real problems at year end.
• Two tax returns now exist. There is the company's return, which pays 28% on its profit, and your own personal return. The company also runs its own provisional tax cycle once its first return crosses the threshold.
• Records get more formal. You file an annual return to the Companies Office, keep minutes for significant decisions, and keep books that can prove the boundary between you and the company held all year.

How Coffer fits

Coffer is built for the sole-trader side today, and company support, meaning the 28% math and the shareholder current account, is on the roadmap. If you're mid-transition, Coffer keeps your final sole-trader period clean. Every pre-switch invoice, its GST, and the tax accruing on that income stay tracked right through to the switch.