Going Limited: Worked Example
Peter Marshall Bsc (Econ) BA MBIM is a Fellow of the Society of Business Teachers, and an experienced educator in business subjects. He is also a prolific author and his books have been translated and sold worldwide. He lives in London, UK.
Armstrong, a sole proprietor, traded as Armstrong Engineering. He decided to form a limited company and transfer the assets and liabilities to it in return for ordinary shares. Assuming that the creditors had agreed to his transferring to the limited company the responsibility for the debts he had, as a sole proprietor, personally owed to them (by no means always the case), the opening balance sheet of the new company would be as shown below.