Starting a business/shares?

[janefoster]

Hi, hopefully someone will be kind enough to offer some help with my question as I am totally stumped as to the best way to go with this.
Myself and partner have decided to buy a few properties to let, mainly to make the most of the prices which will probably not be around for too much longer.
My question is this....his credit is very good, mine is at the other end of the scale (think bad and double it!)....anyway, we thought that he could apply for the BTL mortgage as he has a good track record, however I would be the one putting up the deposit and controlling the let etc.
Would it be feasible to set this up as a ltd company with me as a shareholder so protecting my investment and obviously if/when we come to sell I would take my contribution plus the % share of any increased equity?
I hope I have put this in a way that it can be understood as I need to know the best way forward.
Thanks in advance!

[cjd]

Well you can, but as a major shareholder in the Ltd company the lender will probably look at your record and decline. In any case, you should talk to a commercial lawyer about the best way to structure this - it's very important to get it right.

[Indizine]

Hi

as much as it's about starting a business, this question I think, would get a better response in the financial forum so i've moved it here.

[Nilesh Mandvia]

As you mentioned that you do not have good credit rating, you may have difficulty getting finance. Also banks/lender do ask for directors personal guarantee too.

Also you need to consider administration and compliance for limited company, tax etc

If were to do via ltd company, then you would be double taxation. When you come to sell property you pay tax on gain at corporation tax currently 21% for small companies. Ltd co not entitled to annual exemption.

You also pay tax on rental income too. So when you come to draw money, you pay income tax again on dividend above the basic rate tax.

While if you own personally, then you pay capital gain tax at 18%, you are entitled to annual exemption £10,100 (You pay capital gain tax above this amount).

[janefoster]

Thanks for all the replies. My thinking was that I would not be a director as I am aware that I would fail the credit check. I would simply hold shares in the company and these would have the value equivalent to the amount I put in. I assume I would then get dividends (if any...probably wouldnt happen as this is an investment for growth/later resale).
My thinking was along the same lines as any other share company, eg I have some shares in BT but I didnt get credit checked when I bought into the company.
There would be only 1 director in this company which I have read is Ok now.
Thanks again everyone

[James Smith]

I wouldn't buy BTL inside a company right now. Borrowing is on average 1% higher (if you can get it) and as Nilesh mentions the taxes are a lot higher on exit, in particular you get a double hit on Corporation tax when you come to sell and then income tax/CGT when taking the money out of the company. Only if you have a very unusual situation would this work out for you.

It sounds like your partner needs to buy and you to lend the deposit to them and manage it. This would mean the rental income would be his tax bill although you could charge a "lettings agent" fee which might help taxwise depending on your position. For this sort of thing take proper advice BEFORE you purchase.

Hope that helps

[cjd]

My thinking was that I would not be a director as I am aware that I would fail the credit check. I would simply hold shares in the company and these would have the value equivalent to the amount I put in. I assume I would then get dividends (if any...probably wouldnt happen as this is an investment for growth/later resale).
My thinking was along the same lines as any other share company, eg I have some shares in BT but I didnt get credit checked when I bought into the company.

If you held 50% of BT's shares, the bank would take an interest :-)