Setting up an IP company

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From: Lan Diep


Hi All

I have heard from HK that to protect my personal liability, I should set up a company for my IP's.

How does this work? I thought with every company, you still need a degree of guarantee and personal liability - so that not every one can just set up a company, things go bad and then say it doesn't effect the sole owner of the company?

And if setting up a company is the right thing to do..should I be looking at setting up a company before I purchase my property?
 
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Reply: 1
From: Robert Forward


Hi Lan

My thoughts are, it is only beneficial to have your properties in a company if you are positively gearing them or trading properties so your company makes money. Not many banks will lend to a company that has all negatively geared properties in it.

You can't negatively gear a property in a company name to your "paye income". Though if your company makes enough money you sure can negative gear a property in your company name.


Though saying all this I believe HK is saying to place properties into a company structure for safety/liability reasons. Of which I fully agree. A trust structure also does this, so a company may not be the best way to do this. But please speak with an accountant about the full ins and outs of this.

Just food for thought.

Cheers
Robert
 
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Reply: 1.1
From: Sergey Golovin


Yep,

I have just asked very same question on very same forum about 3-4 month ago.

Could not be any better answer, then this one.

Any way here is more for your thoughts -

http://bne003w.server-web.com/read?4302,170

Serge G.
 
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Reply: 2
From: Michael G


Hi,

A company is but one structure, but one problem with companies, is that you still own the share, so on your list of assets is 1 share.

If someone attacks you, they take the share and basically take control of the company which by the way, controls your property. Not a good idea.

Unless that share is owned by a trust.

Michael
 
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Reply: 2.1
From: Terry Avery


Hi Michael,

Yes someone can sue you for your one share in the company. However if you
own one share and your wife owns 10,000 then how much control can they gain?
Alternatively if the one share you own does not give full rights to share in
profits (dividends are at the discretion of the directors) then there would
be little value in them even suing you for that one share.

You can set up many classes of shares within a company and attach voting
rights, rights to dividends and so on. In this way you can protect your
assets and split income.

Cheers

Terry
 
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Reply: 2.1.1
From: Michael G


Hi,

I guess that would mean your spouse/defacto would be limited in what they could venture into.

DINK couples who's spouse may earn just as much as you do, could not join income and debt potential as they would need to keep distance.

Then there is a potential problem where only you sign all the documents and your spouse accidently injures someone on their way to work or shops, and you find out your insurances don't cover the claim, but all the assets in your spouses name start to look appealing to litigators :)

Or maybe you keep all your +ve geared properties in your low income earning spouses name for tax purposes and some electrician fries themself in your IP, and you may or may not have enough landlord insurance to cover the claim. Again those assets in your spouses name start to look very liquid to litigators.

Just a thought...

Michael
 
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Reply: 2.1.1.1
From: Dale Gatherum-Goss


Hi

This is why many people start to consider using Trusts instead of companies. The legal people sue the trustee of the trust and the Appointor merely sacks the trustee and replaces them with another.

The assets are safe and you start to use the same rules as the truly wealthy.

I hope that this helps

Dale
 
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Reply: 2.1.1.2
From: Terry Avery


Hi Michael,

Yes you are right that the spouse may be sued also which highlights the
importance of risk management through insurance. Of course it will depend on
how everything is structured and whether the company has any assets or they
are in a trust. Ownership and liability need to be separated and insured
appropriately. I guess crispy electricians are a problem but they would have
their own insurance cover, and yes I know their insurers would probably go
after your insurance company or you if you didn't have any. Traffic
accidents I am not so sure about as in Victoria I think the no fault claims
don't point the finger and protect you from common law remedies but I am
prepared to hear if this is not the case.

Cheers

Terry
 
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Reply: 1.1.1
From: Lan Diep


Hi Robert and All

Thanks for all your replies. This is so useful! I am amazed at how much information is on this forum, it's actually getting quite addictive to read...


I have not yet brought any IP's but hopefully would like to in the next few months - it's finding the property that's the hard part.

Could any one suggest good Accountants in Melbourne that are experienced with IP Accounting??

One name has come up in another posting:

Chris Edwards a call 02 45886273. Park Mall, Richmond. Solicitor & Accountant.

Thanks in advance
Lan
 
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