Do business assets belong to me personally or my company?

Who do the assets of your limited company belong to?

The limited company structure means your business is a separate entity from yourself as an individual in law, and unlike sole trader businesses, its assets belong to the company rather than you personally.

This clear separation means that, in most instances, you are only liable for the amount of money you have invested in the company rather than any and all the debts it accrues. 

In contrast, sole traders face unlimited liability if their business becomes insolvent. There is no legal separation between the business and its owner with regard to assets, which places their home at risk if the business declines and becomes insolvent.

What are business assets?

Business assets are those which are purchased primarily for use in the business and for its ongoing activities. They can be broken down into various categories and subcategories.

Initially, they are identified as either tangible or intangible assets:

Business assets can be further subdivided into those that convert quickly into cash, called current assets, and fixed assets which are those that are not as easily converted into cash.

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Do any of these business assets belong to you personally if you are a company director?

Company shareholders own the business, but not the assets held within it. If you are the shareholder of a company, therefore, you do not own your company’s assets – they are owned by the company due to its status as its own separate legal entity.

If you purchase assets for your company with personal funds, which is often the case when a new business is set up, you will transfer ownership of the assets to the company and account for this in your books. By using personal funds to buy company assets you are investing your own money in the business and the company then, technically, owes you this sum back.

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What about transferring personal assets you already own?

When you start a business, it is also common to transfer personally-owned assets into the company for use by the business. When doing so, you need to determine what the current market value is for each asset, taking into account its age, condition, and other factors.

Assets need to be itemised on an invoice prior to transferring the invoice total from your company bank account to your personal account. The business’ books should be updated accordingly, and if you have the original receipts it is advisable to attach them to the invoice as supporting evidence in the event that they are needed later.

What happens to business assets if you close your company?

If you close down a limited company that is solvent, via Members’ Voluntary Liquidation (MVL) or dissolution, and there are assets remaining in the business once creditors have been paid, they are converted into cash for the benefit of shareholders.

If the company is not liquidated through the formal MVL process, but is dissolved by the directors, it needs to dispose of all assets prior to making the application for dissolution. If this does not happen, the assets can become property of the Crown – known as ‘bona vacantia.’

Although there is a clear line drawn regarding the ownership of business assets where a limited company is concerned, there are other elements you may need to consider. The tax implications are just one if you are closing down your business and thinking about purchasing any of the assets yourself.

If you would like more information on the ownership of business assets, how to account for them in your books, and where you stand in legal terms if you are transferring asset ownership, our experts at Real Business Rescue can help.

We will provide tailored advice and guidance, and ensure you understand your legal position as a director. Please contact one of the team to arrange a free same-day consultation - we operate an extensive network of offices around the country so you are never far away from professional assistance.