Two or more people can buy properties in their own name or in a business name. For example, John Smith and Anne Smith could buy properties jointly in their own names or use a business name such as J & A Smith Properties or almost any name they like. That is so long as no-one else is using it or it breaches a registered trademark. So you might be able to use something like Janda Quality Homes (Janda = J and A) but try something like Virgin Homes or Wimpy Homes and you will find yourselves in trouble - probably in Court!
Just as with a sole trader the main advantage is simplicity. Lenders will offer a higher loan to value - 85% is standard even for people with poor credit history, and 95% is not unknown - than they typically will to companies or trusts. On the downside, be aware that if you trade in a name that is not your own then lenders and solicitors will need to do even more tedious Anti Money Laundering checks on you. You will need to have a solicitor draw up a proper partnership agreement which will set out what each partner is to contribute and what share of the profits will belong to each of them.
Taxation. Along with a sole trader situation this is probably the worst structure to use from a tax planning position. The partnership itself does not pay tax but draws up partnership accounts to show what profit has been made and each partner is then responsible for paying the tax on their share of the partnership profit. As with a sole trader profit on rental will be taxed as part of the overall income of each partner at the highest rate they pay and profit on sale of properties - Capital Gains - will be taxed at 40%. That said there are ways to mitigate the tax burden and you should speak to a specialist property accountant or independent financial advisor. If you contact us we will be able to put you in touch with someone local to you.
To consider the pro's and con's of different types of company structure including trading as a Limited Liability Company in greater detail visit the following website: AR Corporate - Types of Company or download the following document Why Trade as a Limited Company.
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