Do-business-assets-belong-to-me-personally-or-my-company

Who do the assets of my company belong to?

A limited company is seen as its own legal entity. This means it’s accountable for any debts it builds up and it legally owns all its belongings. 

Company directors can’t treat company assets, like bank cash, as if they were their own. Any money taken out from the business must go through proper channels, like getting a salary or dividend payment.


Business Assets: A Quick Overview On What Are They? 

Business assets are mainly bought for use in the business and can be categorised into different groups. Initially, they’re labelled as either tangible or intangible, but what does this mean?

  • Tangible business assets are physical belongings such as property, equipment, vehicles, and machinery. They’re assets you can see and touch.
  • Intangible assets encompass goodwill, intellectual property, brand reputation, and business databases, among others. They’re assets that you can’t see or touch.
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Business assets can be divided into two main categories: current assets and fixed assets. Current assets are those that can quickly be turned into cash, usually within 12 months. Fixed assets, on the other hand, are not easily converted into cash.

  • Current assets consist of cash, short-term investments, inventory, and deposit accounts. 

  • Fixed assets include long-term investments, equipment, property, land, and plant.
 
 

Who has the ownership of your company assets?

The limited company structure makes your business its own legal entity. Unlike sole trader businesses, its assets belong to the company, not to you personally. This clear distinction means that typically, you’re only responsible for the money you’ve put into the company.

On the other hand, sole traders encounter unlimited liability if their business can’t pay its debts. There’s no legal division between the business and its owner regarding assets. This situation puts their home in jeopardy if the business fails.


Can A Director Be Personally Liable For Your Business Assets?

Company shareholders possess the business, but not the assets held within it. Even if you are the sole shareholder, you do not own your company’s assets. They belong to the company as it’s a separate entity.

When you buy assets for your company using personal funds, which often happens when starting a new business, you must transfer ownership to the company and record this in your books. Essentially, you’re investing your own money in the business, and the company then owes you this amount.


How about transferring your existing personal assets?

When starting a business, it’s common to transfer personally-owned assets into the company for business use. During this process, you must assess the current market value of each asset, considering its age, condition, and other relevant factors.

Before transferring the total amount from your company bank account to your personal account, assets must be detailed on an invoice. 

The business records should be updated accordingly, and if you have the original receipts, it’s advisable to attach them to the invoice as supporting evidence in case they are needed later.


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What happens to business assets when a business closes?

If you close a solvent limited company through Members’ Voluntary Liquidation (MVL) or dissolution, and there are assets left in the business after creditors have been paid, these assets are converted into cash for the benefit of shareholders.

If the company isn’t liquidated through the formal MVL process but is dissolved by the directors, it must dispose of all assets before applying for dissolution. Failure to do so may result in the assets becoming property of the Crown, referred to as ‘bona vacantia.’

While there’s a distinct ownership line for business assets in a limited company setup, there are other aspects to ponder. Tax implications are one consideration if you’re closing your business and contemplating purchasing any of the assets yourself.

For further details on business asset ownership, accounting practices, and legal implications regarding asset transfers, our experts at Vanguard Insolvency are available to assist you.

We offer personalised advice and guidance to ensure you comprehend your legal position as a director. Please reach out to one of our team members to schedule a complimentary same-day consultation. With an extensive network of offices nationwide, professional assistance is always within reach.

Senior Partner at Vanguard Insolvency Practitioners | Website | + posts

I am an insolvency professional with a distinguished career specialising in commercial insolvency, adeptly navigating Creditors Voluntary Liquidation, Company Voluntary Arrangements, and Company Administrations. With a comprehensive understanding of insolvency laws and an unwavering commitment to ethical practices.