What was broken
A logistics business had grown rapidly from a sole proprietorship into a regional enterprise with multiple warehouses and institutional clients. The owner began facing challenges in obtaining larger contracts, attracting investors, and limiting personal liability under the existing business structure.
What we did
CapEasy managed the complete transition from a proprietorship to a limited company, including incorporation, transfer of business assets, indirect-tax registration migration, tax registrations, contractual documentation, and compliance planning. The conversion was executed while ensuring uninterrupted day-to-day operations.
Where it landed
The business transitioned seamlessly into a corporate structure without operational downtime. The new entity enhanced credibility with customers, improved access to institutional financing, and positioned the company for long-term expansion.
A company is a new legal person — your books have to say so from day one
In Australia, incorporating turns "the business" into a separate legal entity with its own ACN, its own bank account and its own set of statutory obligations. business.gov.au is explicit that a company "forms a separate legal entity" and that members are not personally liable for its debts in that capacity — which is exactly the credibility and liability shift the logistics engagement was chasing. But the separation is only real in the ledger if the opening balances are built as a genuine handover, not a renamed continuation of the sole-trader file.
That means an opening balance sheet for the company dated to the cut-over: assets and liabilities brought across at a value someone can defend, trade debtors and creditors reassigned to the new entity's name, and the sole-trader ledger closed out to a final trial balance rather than left running in parallel. Registering the company with ASIC is the legal step; a clean opening trial balance is the accounting step, and lenders and clients only see the second one when they ask for management accounts.
The director loan account starts on the day the company opens a bank account
The moment a sole trader's equipment, stock or cash moves into the new company — or the director puts personal funds in to fund the switch — that movement is a loan between the director and the company, and Division 7A of the tax law treats it as one from the first dollar. The ATO's guidance on Division 7A is the reference point here: an unrecorded or informal advance between a director and their company can be treated as an unfranked dividend if it is not documented and, where required, put on a complying loan agreement. That is a very different tax outcome from a properly minuted loan account.
The discipline that keeps this clean is the same one CapEasy applied on the ledger side of the logistics conversion: every asset or cash movement between the old proprietorship and the new company gets a dated entry — a sale, a capital contribution, or a loan — never an unexplained balance. A director loan account, opened and reconciled from the first transaction, is the artefact your registered tax agent needs to keep Division 7A off the table at year end.
What ASIC, your registered agent and a lender each want to see
ASIC's company-registration process runs through the Business Registration Service and produces an ACN and certificate of registration — but registration is the start of an ongoing obligation, not the end of one. business.gov.au notes that companies must keep financial records, lodge an annual tax return, have directors complete a declaration of solvency each year, and notify ASIC of key company changes within a set window. None of that is possible from a ledger that still mixes the sole trader's and the company's transactions.
A lender or an institutional client evaluating the new entity — the exact audience the logistics business needed to win over — asks for the same three things every time: the opening balance sheet, GST registration carried across (or freshly registered once turnover crosses the threshold business.gov.au cites at $75,000), and management accounts that read as the company's own history from the cut-over date forward, not a story stitched onto the old ABN's figures. CapEasy prepares that file; your registered BAS or tax agent reviews and lodges what the ATO requires.
What to take from it
- Incorporating is a legal cut-over; your books only reflect it if you close the sole-trader ledger and open a fresh trial balance on the same date.
- Every asset, cash or stock movement from the old business into the new company is a transaction — record it as a sale, contribution or loan, never as an unexplained balance.
- A director loan account exists from the first dollar moved between director and company; document it before the tax authority treats it as a dividend instead of you.
- Company registration is the start of the obligation, not the end — financial records, annual solvency declarations and prompt change notifications all sit on the company from day one.
- A lender or institutional client reviewing the new entity wants an opening balance sheet and management accounts that read as the company's own history, not the old entity's figures relabelled.