From: Funky Whuff

Hi all,
This is Liz, your friendly inexperienced but semi-educated newbie on the forum... just wondering if many of you had set up corporations with which to house your assets (get it - ha ha!). Is it viable to do and how much does it cost to set one up? Not that I have any such assets yet, but there is nothing wrong with forward-planning I think!
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Reply: 1
From: Nigel Kibel


When it comes to ownership structure, there are two important considerations - security and taxation.

If you are self employed or run a business, your chances of being personally sued or suffering financial loss are greatly increased. In this case, personal assets should be held in a separate entity - usually a company or a trust. This can provide protection of your personal assets.

Another consideration, however, is tax minimisation. If you are operating a buy and hold strategy and making deductions, then the property is usually held in the person or entity paying the highest level of tax. This is so taxation savings are maximised. If this is the case, and you are on the top marginal tax rate, it may be better to hold the property personally, rather than in a company.

An individual on the top tax rate is paying 47 cents in the dollar tax, whilst a company only pays 30 cents in the dollar. Additionally, a company forgoes the benefit of capital gains tax concessions.

If, however, you are "trading" properties and making a profit (income), then this trading should be done by the person or entity on the lowest tax rate.

You are wise in addressing this issue before you begin investing. You should seek professional advice from both your accountant and solicitor. Your accountant may appear more concerned with tax, whilst your solicitor may be more concerned about asset protection. Because of this, it is often better to put them in a room together and battle it out!

Hope this brief summary helps.

Nigel Kibel
The Investment Institute
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