Setting up new company - what else should I do?
Discussion
I'm about to form a Ltd company to buy a piece of land next to my house.
(It needs to be bought by a 3rd party entity so that some rights and easements can be maintained, and in some cases transferred)
My wife and I will be lending the company the money to buy the land, by way of a legal mortgage, and putting a charge on the land.
Apart from buying the land and then transferring some rights, future activities of this company are likely to be limited to
1. maintenance and repairs (e.g. guttering, painting, walls etc)
2. buying ladders, materials etc for 1, or hiring trades for the same.
3. either buying an adjoining parcel of land from another company, or taking over that company.
In this scenario is there a) any need or benefit to open a business bank account?, and b) is it worth registering for VAT?
(It needs to be bought by a 3rd party entity so that some rights and easements can be maintained, and in some cases transferred)
My wife and I will be lending the company the money to buy the land, by way of a legal mortgage, and putting a charge on the land.
Apart from buying the land and then transferring some rights, future activities of this company are likely to be limited to
1. maintenance and repairs (e.g. guttering, painting, walls etc)
2. buying ladders, materials etc for 1, or hiring trades for the same.
3. either buying an adjoining parcel of land from another company, or taking over that company.
In this scenario is there a) any need or benefit to open a business bank account?, and b) is it worth registering for VAT?
Then you may well fall foul of the legal necessity for a company to be formed with an intention to make a profit. Money laundering rules would also indicate you would need a bank account for a company. If it is set up to buy land then what guttering is there, land does not include buildings, these are separate items.
Would the profit be theoretically achieved by owning the land and selling it in the future?
I was going to form it with a SIC of 68100 - Buying and selling of own real estate
The land/title s somewhat complicated. My solicitor needed lots of photos before he understood it.
The property in question is a courtyard - basically everything that isn't buildings in a private gated mews.
Except due to the way different titles were hived off over the years it also includes portions of some buildings. There is a brick bin store, the side wall to my house from ground to 1st floor level (which needs roof and guttering repairs), the balcony access to my house and that of my next door neighbour (more gutter work needed here) and the stairs that access that. Plus another wall and two access doors.
My interest in buying is basically to a)remove a disinterested absentee landlord from the equation when things need maintenance (and right now, a lot of things need maintenance) and b) to transfer whatever bits of the title necessary to clear up and simplify the various titles so that I own all of my house and my neighbour owns all of theirs, and the courtyard title consists just of that.
The future potential purchase would be of the access driveway which is owned by another company. The owner of that would be amenable to selling.
Given the maintenance requirements I wondered about whether it was permitted, and worth it, to get VAT registered and get trade accounts etc.
I was going to form it with a SIC of 68100 - Buying and selling of own real estate
The land/title s somewhat complicated. My solicitor needed lots of photos before he understood it.
The property in question is a courtyard - basically everything that isn't buildings in a private gated mews.
Except due to the way different titles were hived off over the years it also includes portions of some buildings. There is a brick bin store, the side wall to my house from ground to 1st floor level (which needs roof and guttering repairs), the balcony access to my house and that of my next door neighbour (more gutter work needed here) and the stairs that access that. Plus another wall and two access doors.
My interest in buying is basically to a)remove a disinterested absentee landlord from the equation when things need maintenance (and right now, a lot of things need maintenance) and b) to transfer whatever bits of the title necessary to clear up and simplify the various titles so that I own all of my house and my neighbour owns all of theirs, and the courtyard title consists just of that.
The future potential purchase would be of the access driveway which is owned by another company. The owner of that would be amenable to selling.
Given the maintenance requirements I wondered about whether it was permitted, and worth it, to get VAT registered and get trade accounts etc.
PistonBroker said:
The Property Owners Liability section of your home insurance is unlikely to cover this element so, if the potential for Third Party Bodily Injury or Material Damage is a concern, then it would be worth arranging a Landowners Liability policy. ;-)
Yes. I had a friend who got caught out like that when someone trespassed on a car park he had invested in and then sued him because they apparently tripped. He had to sell the investment to pay the claim!Breadvan72 said:
KevinCamaroSS said:
Then you may well fall foul of the legal necessity for a company to be formed with an intention to make a profit. ..
There is no such thing. OP, you are (very slightly) better off seeking legal advice in S,P&L. What is the logic the OP feels that applies to a company being used to hold land indefinitely and not use that land to generate any income at any time during the period of ownership of that land?
Why was the OP asking about registering for VAT? Does he think that the company could reclaim VAT on its costs but never have to declare any VAT on any sales as the company will never generate sales?
He needs to be a bit clearer in what his intentions really are.
Why was the OP asking about registering for VAT? Does he think that the company could reclaim VAT on its costs but never have to declare any VAT on any sales as the company will never generate sales?
He needs to be a bit clearer in what his intentions really are.
Yes, I was thinking about reclaiming VAT on company purchases.
Never say never on the income front, but that's not the immediate plan. Perhaps in time it could become your normal sort of management co and all the residents buy in to become directors.
For now, because it's expedient, because the current owner refuses to talk to the other neighbours, and because they aren't likely to cough up, it won't be. It's just there to buy and maintain the property and assign some rights.
Never say never on the income front, but that's not the immediate plan. Perhaps in time it could become your normal sort of management co and all the residents buy in to become directors.
For now, because it's expedient, because the current owner refuses to talk to the other neighbours, and because they aren't likely to cough up, it won't be. It's just there to buy and maintain the property and assign some rights.
As Breadvan says, there is absolutely NO requirement for a company to have to trade. Many companies are set up but then do nothing.
HOWEVER, if a company (or a person for that matter) wants to register for VAT, they MUST demonstrate that the company (or themselves as a sole trader) is setting up a trading entity which will, at some point clearly defined, start generating income on which VAT will be charged, collected and paid over to HMRC.
If the company is trading in land or buildings, there are special VAT rules that you would need to be aware of which could be seriously detrimental to your future plans for the land.
HOWEVER, if a company (or a person for that matter) wants to register for VAT, they MUST demonstrate that the company (or themselves as a sole trader) is setting up a trading entity which will, at some point clearly defined, start generating income on which VAT will be charged, collected and paid over to HMRC.
If the company is trading in land or buildings, there are special VAT rules that you would need to be aware of which could be seriously detrimental to your future plans for the land.
DO NOT use your personal accounts when dealing with limited company transactions.
Another world of HMRC pain awaits anyone who thinks they can run a limited company without the company having its own bank account.
Once the company has been set up at Companies House and has registered for the appropriate taxes - the next priority is to open a company bank account.
Another world of HMRC pain awaits anyone who thinks they can run a limited company without the company having its own bank account.
Once the company has been set up at Companies House and has registered for the appropriate taxes - the next priority is to open a company bank account.
janesmith1950 said:
For clarity a LTD and LLP are treated very differently for tax purposes.
The nuances and subtleties of tax law. In these circumstances, they are the same. An LLP needs to carry on a business or trade, with a view to profit, to be treated as transparent for corporation tax proposes. Absent that, it's an opaque body corporate, which is subject to corporation tax. CTA 2009 S1273(1)An LLP needs to be set up with a view to making a profit in any case. So might never be able to do what OP is aiming for. LLPA2000, S2(1).
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