It’s a familiar story.
You have a great idea, and decide to go into business. Starting out for the first time, and unsure how it will go, you set yourself up as a sole trader. A friend recommends that you jump on Xero as it’s easy to use – so you find a Xero expert and get set up. You have the world at your feet.
Over time, your business grows and thrives – after all, you’re good at what you do. So you make the decision to transition to a company structure. One item on your action list is converting Xero across – and what happens next is important to get right.
What not to do
Lately at Digit, we’ve come across a few cases of how not to change over to a company in Xero. What people have done is simply change the ABN to the new registered company, change the dropdown in Xero for organisation type to ‘Company’, and away they go. It’s simple, right?
Not quite …
As far as the ATO is concerned – even if you’re trading under the same name, ‘you as a sole trader’ and ‘you as a company’ are completely independent and unrelated entities. Like two strangers walking past each other in the street.