SMF - Just Installed!

PLC OR NOT

Started by Badger, August 15, 2007, 08:46:34 AM

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Badger

Buying property for investment is a business after all.  In business, *not sure why its different in the house buying world * Investment comes from the outside i.e. banks and angels etc. so why do we put our own money into it when we start.  In business if you are a director and you are a LTd PLC ETC if things go tits up then the risk is not as severe ( if you can prove you where not negligent* than it is if your not.  So if my rentals go wrong now I am responsible for the loan etc and this could bankrupt me.  Not the case if I was a director. As its interest rates dictating my success not me.
So why don't more property investors look for outside investment and become a director of there own company instead of being MR  or Mrs sole trader , you get the drift.  Thus limiting there risk !


Badger

mountie

I am a director of a Ltd co. and my lender has always insisted i sign a personal guarantee form so that i am responsible for the payments if the company 'disappears'.

Badger

Hi Mountie,
Thx for the reply, LTD as it says on the tin is limited risk, am i right.  Ok i understand not all risk is eradicated, * where is the fun in that * and as director you are still liable to repay.  but if you can proove there was no negligance by your own doing then the law favours you !.  Its a real grey area i think.  You hear so many differant things its crazy.

Badger

LLC is what i was thinking of limited liability company, this limits the cost to the director/s if things go wrong.


Badger

mountie

LLP - Limited Liability Partnership.

eg. 4 partners of an estate agency (let's keep it topical) used to be a simple partnership agreement.  Each partner is responsible for the firm - if one goes down, they all go with him.

LLP restricts each partners responsibility to himself only.  If he goes down, the others are protected from his mess.

vwilson

#5
I definitely intend to open a limited company before I start building a property portfolio, although you need at least two directors to form one so I may have some fun with that. You can set it up so the other director is a "sleeping partner", they just sign something right at the start and possibly the annual accounts too. Tax returns are the major pain, but they're not always as bad as people say. The benefits, aside from the limited liability, is that you can take out all your costs (and even be VAT registered so claim your VAT back) before declaring any profits, or cashing in dividends etc so you pay less tax (although I'm basing that on prior IR35 rules so there may be more to it now).

Of course it does mean you'll need a commercial mortgage, but I'm sure the banks will be just as keen to take your interest either way.


V

PS. PLC is a public limited company where you float your company on the stock exchange and sell shares to raise funds, and everything gets a lot more complicated; not sure its worth being at the mercy of those fickle shareholders just to get your £15K ;)

Badger

Two directors and a secretary, one of which has to be qualified to PA standards or business qual. So i hear


XX Badger xxx

vwilson

Ah, but you're cool for that, because your accountant can do it ;)

Also, not sure if this still applies but it did around '98 '99 time, get the accountant to register your company to his office. If you register it to your house there's (apparently) a small risk that the inland revenue will consider your home to be business premises, which is (apparently) more expensive.


V

Badger

Thx V,
Wise words once again, have you given us your profile yet * tell us about yourself *Or am i being to forward here  ;D
Thing is i have 2 accountants, one for money concerning the care home and property business, and another to do the business managment accounting and the books for the pyro business.  The bastards just skim me man. lol. na they do a good job.
As for the Tax man he knows where i am 24/7, feels like big bro is watching me, when infact im watching it, BRIAN TO WIN, BRIAN TO WIN.

Love ya work V

Badger

vwilson

My profile, eh?

Well let's see ... what is there to tell?

I'm a 27yo IT Project Manager based in the midlands. Currently I own one flat (my own) which my original intention was to tart up a bit and rent out as a "professional let", once I'd lived in it for a bit and built up some cash. It needs quite a bit of work to achieve that (new windows, new kitchen and bathroom ... the shower was manufactured in 1984), and at the moment I'm saving up to do that work as well as sorting out some other financial situations.

My goal is financial security (which I've never had) and ultimately financial freedom; I study east asian languages as a hobby and it'd be great to be able to travel out there a bit more, possibly spend a block of time out there. I am mindful of the impact such a career break would have on my earning potential. I don't currently plan to have a family, but if I did I would need to be sure I had the financial resources to give kids a good quality of life irrespective of whether the parental partnership stuck together (as well as to maintain a good quality of life through the necessary career break). I can't afford to wait until I change my mind and decide to have a family to put that in place, so it needs to be there just in case. After a health scare a few years back my concerns over finding good healthcare at home/abroad should it be required add fuel to my money making ambitions, as this would remove some concerns that hang over me. It'd also be great to downshift some, and if I'm forced to admit it, yeah, it'd be great never to have to work again!! But keeping money working for me will always take a bit of time and attention, that's ok - an hour a day I could live with  ;D

The little bits of knowledge about PLCs and the like I've just picked up over the years by being fortunate enough to know people involved with those things. I lived with an IT contractor through the Y2K thing, so saw how his business was structured, the effects of IR35 etc. Not sure property is the only place you'd ever want to put your money - I remember black Wednesday and the property crash around '90 too, high unemployment, riots etc. I'm very risk averse, possibly too much for this industry but we'll see.

So yeah, that's where I'm coming from. I'm sure everyone has some damn good reasons for becoming as affluent as possible, to be fair!! My cousins and I have inherited my late grandmothers house and are in the process of selling it, so perhaps when that is all finished there will be some spare cash to plough into investments and really get started.


How's that?

propertyfag

That was a pretty interesting read :)

I'm a nosey bastard, so I love reading other people's profiles.

From what I last heard, IT Project Managers earn a good wage!

vwilson

We do ok, although it depends on lots of factors really. Experience is a key one. Most of the PMs I work with are older than me. It never used to really cross my mind, but these days the more challenges I run up against and the more examples I see of how or how not to handle things, the more I realise a bit more experience under my belt would help. But that's what I'm building up now anyway, and nobody can get it any quicker!!

It also took quite a bit of investment of time, money and moving about to get to where I am; I'm still paying off my student loan (there's at least £7K on there) and I have some juicy VISA debts that bounce from one 0% card to another. It'll be a while before I can really use all the money I earn for something other than paying back what I invested to "earn" that much.

propertyfag

HA! I used to juggle between 0% cards all the time. I tell all my friends to do it when they need a loan, but they say it's too complicated, and they don't understand how it works.

vwilson

Quote from: propertyfag on September 03, 2007, 01:19:25 PM
they say it's too complicated, and they don't understand how it works.

Oh dear!!! Their path to fortune may well be frought with danger!!

A mate of mine suggested moving it to a bank loan, but that has the disadvantages of fixed monthly payments (high ones, too) and invariably a higher interest rate. CC fees do mean 0% is rarely *really* 0% these days, and of course there's always the risk you won't pay it off or the 0% deals will dry up, but if I wanted a chunk of money I'd definitely opt for the CC route because of the flexibility and better rates. Fixed high monthly payments are a nightmare if your income dries up for a month or so, cashflow is king!