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Property owned in the business name vs personal name?

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Mr_S
Super Contributor
Hi forumites, just need a bit of input from you to help me make my decision...to cut a long story short, i had applied for a homeloan in my business name and it looks like its going to be approved but after consulting my accountant, he strongly suggested i put it in my personal name citing tax implications...the only advantage he mentioned for it being in my business name was the limited liability the business would hold, other than that he mentioned i would be paying double in tax and said i should think about it. I am still keen on keeping it in the business name purely because i want to separate the risk from me personally...your advise and experience please...btw im 23 years old and am not intending on selling this property...
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24 REPLIES 24
cheapcheap
Regular Contributor
have you looked at putting it into a trust? and what kind of business is it? cc ,sole prop?
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kwagga
Super Contributor
Have you considered a trust ? Is this your primary residence ? If not, I'd seriously consider a trust.
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SimonPB
Valued Contributor
cgt exception falls away if not in your personal name, assumign primary residence ..
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DEP
Super Contributor
I agree with you accountant. Even if you put bond on the business name, you don't limited risk because the bank get to sign personal surety on your business loans/bond. i.e. if you don't pay you biz bond, they will come for for personal assets.
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DEP
Super Contributor
I agree with you accountant. Even if you put bond on the business name, you don't limited risk because the bank get to sign personal surety on your business loans/bond. i.e. if you don't pay you biz bond, they will come for for personal assets.
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gavin50
Occasional Contributor
If the property is in your name the bank usually will want the bond in your name.I have heard of a few exceptions to this but very few.As stated earlier you will sign a surety so it will make no difference to your risk position.
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dbm
Frequent Contributor
I agree with your accountant. Put it in your name. Your company will pay for it anyway (as rent). It will save you lots of hassels with tax and accounting charges
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Not applicable
My two cents worth. If you put it into your business name, then you will only be able to claim the interest portion of the bond as a tax deduction. But over time, that will fall away and you will be left with no tax deduction and a capital gain in the property. Now you will be stuck, because your business is basically stuck with a dead asset - it can't sell it, because it will be hit with a capital gain, and if it did sell it, your business would have to find a buyer that would be willing to let you rent the property. You will also struggle to sell the business, because the property and the business would go hand in hand leaving the next buyer with a hefty selling price, and it would be a tricky exercise to separate the two (although I am sure the accountants out there could advise otherwise). You have no strategic gain keeping the property in the business (Actually, there are some strategies, like leverage, but on the whole, no). Now if you owned the property, you could lease it to the business at whatever rate you chose - leaving you with a lot of options to play around with your taxable revenue and innovative ways to pay yourself out. With regards to risk, i am not sure if the guys are right. There should be a way of keeping the risk 100% in the business, but then, why would you consider the purchase of a property a risk? Lastly, is the transfer duty for companies the same as for individuals?
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Mr_S
Super Contributor
Thanks for the responses, the property is not my primary residence although it is my first property, it will be for investment purposes only - (Have tennants in the main building, sub-dividing the property and building further outbuildings). The main reasons i wanted it in the company's name was (1) separation of assets (2) leverage advantages (3) creation of a long term property portfolio that wont be affected by any future 'financial mistakes' that i might make in future....the idea of putting it in my personal name is ok, but isnt there a large tax implication for having more than 1 property in your personal name? which then outweighs the other in terms of cost? My bank suggested i let them approve under the business name, then inform them once approved that i would like it to be in my personal name, which would take a further 3 days, and it shouldnt be a problem, but for me separating business from personal would allow me to pursue other business interests without a tainted personal record because of the current dealings this business....
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Mr_S
Super Contributor
Thanks for the responses, the property is not my primary residence although it is my first property, it will be for investment purposes only - (Have tennants in the main building, sub-dividing the property and building further outbuildings). The main reasons i wanted it in the company's name was (1) separation of assets (2) leverage advantages (3) creation of a long term property portfolio that wont be affected by any future 'financial mistakes' that i might make in future....the idea of putting it in my personal name is ok, but isnt there a large tax implication for having more than 1 property in your personal name? which then outweighs the other in terms of cost? My bank suggested i let them approve under the business name, then inform them once approved that i would like it to be in my personal name, which would take a further 3 days, and it shouldnt be a problem, but for me separating business from personal would allow me to pursue other business interests without a tainted personal record because of the current dealings this business....
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Not applicable
OK, I see no fault in that strategy. Just as long as your business is in the business of property, if you get my meaning. If your business is selling widgets of a sort, then I personally don't think it makes sense to have property on its portfolio - since my comments stand
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BlueDolphin
Frequent Contributor
...not intending on selling this property... gives you a big clue. You will not live forever and for this reason (and there are many more) it should go in a well structured trust. The reason here is estate duty. Remember you pay estate on the value and not the net value (value less loan). So have a 2mil building with a 2mil loan and your estate will be inflated by that 2mil. Thats when it has to be sold by the people handling your your estate to pay SARS. In a trust you die and the property/ies stay.
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AST
Occasional Contributor
My accounting brain, place in a property company. You can offset expenses against rental indefinately. If want to sell, you can sell the shares or the property either to your trust or 3rd parties. You want a property porfolio. You can also levergage the equity later should you wish to purchase additional properties. If you build a big enough portfolio, and get vat registered you can zero rate the sale into the future if you sell to a registered vat vendor. By having the investment property in your personal name, you save a few rands upfront on transfer duty. Thats it.
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BlueDolphin
Frequent Contributor
Property company is fine as long as the shares are held by a well structured trust and not in your own name.
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CHATTYCHAT
Super Contributor
No savings in transfer duty personal vs juristic entity - since this year's budget.
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superstar
Regular Contributor
YOu can register the property in my name in that way no tax implication on you or any other administration other than paying for the property
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AST
Occasional Contributor
Thanks for the highlight, important piece of legislation.
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WES
Super Contributor
You have to split risk from assets. Your business is a risk, if the business goes bang, your property goes bang, the property is an asset. Put the property in a seperate property company owned by a trust. Put the business in your own name or another name. Never let the property sign surety for the business. NEVER !!!
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kwagga
Super Contributor
Interesting topic. Does anyone know of the two trusts and one company methord widely preached by Coert Coetzee on his Treoc seminars ? http://www.treoc.com/
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