I've being thinking about this for the last few years of investing. I finally have decided that after a few more purchases i would start a company just through one of the generic websites they have for forming an Australian company and beginning any additional purchases through the company. I'm aware that i won't be able to access the equity from my previous loans as they are in my name and not the company so i understand there may be some financial pitfalls to start off with but does anyone have any advice or tips from starting their own company for investment reasons?
Cheers Tony
Tony Fleming | Triumphant Property Group
http://www.triumphantpropertygroup.com.au
Email MeNSW Buyer's Agent specialising in Western Sydney-Blue Mountains-Orange-Albury
One tip is DONT use a company.
Why are you wanting to use a company?
ps. You could access equity in property you have purchased in your own name too.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Terry,
I understand that company's are not good for appreciating assets due to the 50% CG tax. I buy and hold and have no intention of selling them anytime soon. Is this the reason for you not liking them from an investment property point of view? I would also like the asset protection that a company can provide.
Tony Fleming | Triumphant Property Group
http://www.triumphantpropertygroup.com.au
Email MeNSW Buyer's Agent specialising in Western Sydney-Blue Mountains-Orange-Albury
Personal vs company vs trust vs not investing vs headaches vs sleep time.
A fun merry go round it is.
Look at trusts instead – with a company as trustee.
Companys have a few disadvantages. One is the 50% CGT reduction which is not available so the company will be paying a flat 30% CGT rate where as the individual (direct or via a trust) will pay a max of 24% but probably much lower.
Another disadvantage is that the income of a company does not retain its character. So if you have a capital gain in the company and this distribute it to a person then income is no longer capital gains but dividends. This means a person with a capital loss could not use the income to offset the loss.
Asset protection is another one. Companies offer limited liability but the shares are property so if you are sued then the company provides no asset protection benefits if you hold the shares. If you are going to use a discretionary trust to own the shares then you might as well use the trust to own the property.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Something i definetly need to look into i guess. I'm split minded on the topic
Tony Fleming | Triumphant Property Group
http://www.triumphantpropertygroup.com.au
Email MeNSW Buyer's Agent specialising in Western Sydney-Blue Mountains-Orange-Albury
Trusts make much more sense. With trusts you also have the power to distribute income. And the limited liability is very appealing.
If you have a read of Steve McKnight's books, he goes through a comparison of the different kinds of entities, such as sole ownership, partnership, company and trust. This could be very helpful for you to take a look at.
The conclusion from the book, is that trusts are better, and that he even uses it, and many other investors use trusts too – not companies.
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