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Questions in setting up a new Limited Company


marc s

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Hi all,

 

I am about to set up my Limited Company and had a number of specific questions that I was hoping folks could help me with as I know lots of you have already done this.  Any advice would be extremely appreciated:

 

  1. Is there a difference between a Limited Company and an SPV?  I am planning to create a company purely as a means of buying and holding rental properties, with no other business anticipated.  However, I have heard reference to both Limited Company and SPV and just wanted to check if these are essentially the same thing for the purposes of setting up the company?  If they are not, is there anything special I need to do on set-up to distinguish that it is an SPV?

  2. I understand that it is crucial to select the correct SIC code(s) on setting up.  Can anyone confirm which one(s) I need to specify (i.e. which ones a future lender will want to see/not see)

  3. I understand I have to submit the Articles of Association.  I have found “model articles” on the gov.uk website (https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/376832/model_articles_private_ltd_by_shares_after28April2013.doc) and these all look correct for what I’m seeking to do.  Can anyone advise whether I can simply copy these wholesale or whether there are any important changes I need to make?

  4. Can anyone advise whether I will need a Business Bank Account in the name of the new company?  For simplicity I would in any case open a new bank account to keep things separate from my personal affairs, but for legal or mortgage reasons is it crucial that the bank account be in the name of the company, or can I open an account in my own name and just use that for the company (to save on Business Banking fees)?

  5. For my first purchase (and probably future ones too), I will be giving personal funds to my new company to use as a deposit (my understanding of what is a Director’s Loan).  Does anyone know how these are treated for tax purposes?  Am I entitled at a later date to take money out of the company tax-free up to the value of the Director’s Loans as repayments of these loans (i.e. separate from income or dividends – I understand the tax treatment of these)?  Does this depend on whether the funds are stated at the outset as being “gifted” or “loaned” – and if so how does one formally go about categorising the funds at the point of transfer?

  6. Looking a little further ahead to when I will be applying for a mortgage, I read somewhere that some lenders don’t like SPVs where funds are loaned rather than gifted.  Does anyone have experience of this (view from any mortgage brokers most appreciated!).  Obviously if this will give me problems at a later date I will just ensure that the monies are “gifted”.

 

Sorry for the long list of questions – maybe Rob & Rob can do a step by step course on the actual mechanics of setting up your new Limited Company as I doubt I’m the only one with these questions.

 

Many thanks in advance

 

 

Marc

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Hi Marc,

 

1 & 2) There is no difference between a limited company and an SPV. An SPV is a Limited company set up for a specific purpose, in this case letting property. Apart from having an appropriate SIC Code there is nothing else that you need to do. Most companies that I have seen have been set up with the "68209 - Other letting and operating of own or leased real estate" code.

3) The Articles seem to be pretty standard and would cover 99% of companies.

4) You should have a business bank account. If you operate the business through a personal account any rental income going into the account will go as money taken out of the company in your directors loan account and any purchases wil be money loaned to the company. Depending on the figures it could leave you with an overdrawn loan account and associated tax balance.

5) As long as the trail is clear this can be designated as directors loan when your first set of accounts are produced.

6) I can't see why the deposit being loaned would make a difference, but it would be best to check this with a broker.

 

I hope this helps, but if you have any questions just ask.

 

Thanks

 

Dave

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That's incredibly helpful, many thanks Dave.  I had not considered the implications of the business bank account that you raise but based on this it's clearly not worth the hassle to save probably around £7/month in banking costs (or £5 as I guess these costs would also be tax deductible)..

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  • 3 weeks later...
On 27/02/2017 at 5:09 PM, marc s said:

That's incredibly helpful, many thanks Dave.  I had not considered the implications of the business bank account that you raise but based on this it's clearly not worth the hassle to save probably around £7/month in banking costs (or £5 as I guess these costs would also be tax deductible)..

 

If you want to avoid bank account fees, I would recommend Cater Allen bank. You won't get any interest on the money held in the account but you will also not pay any fees.

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