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Evening All, 

I'm after some advice on how to set up an SPV Limited Company for Investing in property

Myself and 5 friends want to set up an investment scheme whereby we invest a set amount each month into the company until we buy a property. 

We will each have equal shares/rights in the company and equal voting rights, I just want some advice on the best way to go about it, how we can pay into the company legitimately each month, what type of account we would require and the best company structure. 

Any help will be much appreciated. 

Jamie 

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Hi Jamie,

You + 5 friends = 6 directors 

Set up SPV ltd company with 60 shares = 10 shares each or another number divisible by 6.

Open company bank account up ( in however you wish the money to be accessed .e.g. with 6 signatures only and no cards.

Six directors set up a standing order or some over payment method under 'director's loans to company's and transfer the cash each month.

 

Before doing this:

Ensure all directors have good credit scores and are allowed to be directors.

Best to check with your bank that this is an acceptable set up for their company bank accounts. (Unusual yes, allowed ?)

If you are intending to purchase properties with a mortgage or finance check with a broker that a limited company with 6 directors is ok. It probably is, but subject to lenders other criterias etc.

Perfectly legit and above board way of doing this in my eyes.

Hope this helps

Conrad


Conrad Paton

+44 7957 959851

conradpaton@yahoo.co.uk

https://www.linkedin.com/in/conrad-paton-424446110

 

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I'm not sure about the other things - it seems like a question for an accountant. I could presume that each director would put it into the company as a "loan" for tax efficiency, in any old bank account with few charges. The best company structure for mortgage purposes is the most ordinary and simplest, equal shareholders in personal names.

Will you be getting a mortgage? If so you may have limited your options with 5 friends, most limited company buy-to-let mortgage lenders merely by the design of there systems limit the owners to 4 applicants.

 


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On 11/12/2019 at 10:35 AM, conrad_paton said:

Hi Jamie,

You + 5 friends = 6 directors 

Set up SPV ltd company with 60 shares = 10 shares each or another number divisible by 6.

Open company bank account up ( in however you wish the money to be accessed .e.g. with 6 signatures only and no cards.

Six directors set up a standing order or some over payment method under 'director's loans to company's and transfer the cash each month.

 

Before doing this:

Ensure all directors have good credit scores and are allowed to be directors.

Best to check with your bank that this is an acceptable set up for their company bank accounts. (Unusual yes, allowed ?)

If you are intending to purchase properties with a mortgage or finance check with a broker that a limited company with 6 directors is ok. It probably is, but subject to lenders other criterias etc.

Perfectly legit and above board way of doing this in my eyes.

Hope this helps

Conrad

Thank you for your reply,

 

If for some reason someone wanted to leave, would they be able to withdraw money tax free if no profit has been made at the time? I.e. No properties have been purchased yet, or how would they go about it? 

Jamie

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On 11/12/2019 at 10:45 AM, Adam Hosker said:

.....in any old bank account with few charges. 

 

Sorry Adam,

Banks get really upset if you run a company from 'any old account'.

Commercial banking is a must for commercial enterprises. There is only so much you can do from a personal account.

Most banks will give you a 'free charge/fee period' after setting up your company bank account. Usually one or even two years. After that you are looking at around £6 per month...handy when you have 6 directors.

Hope this clarifies

Conrad

 


Conrad Paton

+44 7957 959851

conradpaton@yahoo.co.uk

https://www.linkedin.com/in/conrad-paton-424446110

 

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15 hours ago, jamiequinn said:

 

If for some reason someone wanted to leave, would they be able to withdraw money tax free if no profit has been made at the time? I.e. No properties have been purchased yet, or how would they go about it? 

Hi,

Yes. Your company repays that proportion or portion of the loan back to the director.

It's the directors money anyway so there is no tax to pay, nor NI etc. In exactly the same way you repaid me the £20 I lent you for beers last night for example. You just need to record it.

Company keeps it's own records of the transaction. Tally this up with what the bank statements say. Inform your accountant at year end....yep..nothing to worry about.

You would have to alter the shareholdings if someone left as well.

Guidance on this is available from Companies House website I believe, but that is fairly easy to do.

Keep the questions coming

Conrad


Conrad Paton

+44 7957 959851

conradpaton@yahoo.co.uk

https://www.linkedin.com/in/conrad-paton-424446110

 

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Thanks @conrad_paton

Lots of good advice there, is there a way we can initially set up without being a limited company, until we buy the first property.

I'm just looking at any potential problems I.e. Possible conflict of interest issues with our current employers, or is it typically okay to operate a Ltd company under sic code 68209 as it is just a company for holding property. 

Thanks in advance 

Jamie

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Hi Jamie,

You wish to set up some form of 'investment club' with your 5 friends without going through the Ltd SPV route initially?

Is this your question?

If so, I would speak to an accountant/solicitor/both as I am not the person who can recommend a way of doing this. If you are thinking of using lending in the SPV I would include a mortgage broker to your list as well.

SPV Limited Companies have shareholdings and articles of associations etc that formalise most of the paperwork for you and your friends, that's why people set them up and lenders are 'happy' to lend to them.

Your SPV can be 'dormant' while you are 'not trading' aswell.

Sic codes have been posted up on this forum before. I'd have to check them tbh. One is buying/selling/renting of it's own real estate (or simliar) just can't remember the actual number.

Conflict of interest with your current employers would be written down in your employment contract. Obvisouly I cannot comment further because I havent read these contracts. 

Hope this helps

Conrad Paton


Conrad Paton

+44 7957 959851

conradpaton@yahoo.co.uk

https://www.linkedin.com/in/conrad-paton-424446110

 

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Thanks @conrad_paton sorry for all the questions, can you loan money to the company whilst it is dormant? Because we won't be buying a property for at least a year, the LTD company is attractive for the commitment factor of paying in and having a central Bank account, I've looked at going the other route with legal agreements but it seems like it would be a headache with the legal side and the bank account. 

Jamie

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Hi Jamie,

https://www.gov.uk/dormant-company/dormant-for-corporation-tax

Is ^^ about the extent of my knowledge on dormant companies.

So long as you are not collecting rent and buying and selling houses and just gathering cash to start trading i personally think this falls under the dormant category.

You may accrue interest on your savings, but I dont think the quantities you will be gaining will warrant HMRC launching an investigation into your company.

HMRC are set up to deal with tax evasion/dodging and money laundering issues, you are doing neither I hope.

If you are worried, just phone them up and ask someone about dormant companies and accuing interest.

The chances are your commercial bank charges will removal all monthly interest anyway.

How this helps

Conrad


Conrad Paton

+44 7957 959851

conradpaton@yahoo.co.uk

https://www.linkedin.com/in/conrad-paton-424446110

 

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Hi @jamiequinn

There's lots of good stuff in this thread already, but just one point to add from my side.  If you're planning to take out mortgages to purchase properties, then I'd check with a mortgage broker whether lenders would require you to get independent legal advice for each director, if they are asked to sign personal guarantees (which they usually do).  My experience has been that independent legal advice can mean different things to different lenders and to different solicitors, and in the worse case you could be forking out £300 per person, i.e. 6 x £300 = £1,800, just in fees for independent legal advice to get the mortgage over the line.

In short, I guess I'm saying there could be additional costs to having a set up with six directors.

I hope this is helpful

Best wishes

Rob


Robert Heaton

Greenwich Bookkeeping | www.greenwichbookkeeping.co.uk

Author of "Essential Property Investment Calculations" - Available on Amazon

 

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