Is renting my property a business? Should I register my property as a business?
The pros and cons of using a PLC Pubic limited company
Why you should
Property A - you and your wife
Property B - you and your brother in-law
Property C - you and an investor who throws some private capital into buying the house
All those 3 scenario are different setups and different ownership. Its good to have a different PLC for each of those set ups, stating the different ownership percentages, different ownership benefits, rights, responsibilities, roles and compensation. Setting up a PLC will define all of this.
Doing business in different country or different states. Or your properties are in different country or states from where you live.
You should have different PLC for each state/country or that will mean you will have to file your accounts as a foreigner business entity in the country/state you file your self assessment under. In some country/states you will require different mailing address for each property which is just a headache. Also income tax you will need to file your income tax where you are registered and declare income from where your properties is in, which leads to double taxation. It's simpler if you register your PLC in the country /state your properties is in
Running your own business as a PLC means you have the reassurance of limited liability. Assuming there is no fraud has taken place, your limited liability means you will not be personally liable any financial losses made by your business. A limited company can therefore give you added protection should things go wrong.
This is one of the biggest advantages for many in running your business as a PLC can enable you to legitimately pay less personal tax than sole trader. PLC profits are subject to Corporation Tax which is currently at 19%. You can also minimise the amount of National Insurance Contributions (NICs) you have to pay because PLC dividends are not subject to NICs.
A PLC is a completely separate entity from its owners. Everything from the company bank account, to ownership of assets and involvement in tenders and contracts is purely company business and separate from the interest of the company’s shareholders.
Funding Finding funding can be difficult for all types of businesses. But because a PLC is a distinct entity from its owners it may be a little easier for a PLC to secure business finance than it is for their sole trader counterparts.
A PLC can issue various classes of shares. This means you can easily sell stakes in the company, or transfer ownership of shares. If your PLC has more than one shareholder you should get a Shareholders’ Agreement which outlines your various duties and responsibilities. It can also be used to detail what shareholders can and cannot do with their shares. This will prove invaluable should a shareholder want to exit the business.
A PLC can fund its employees’ executive pensions as a legitimate business expenses which means that pension contributions can be made before tax is deducted.
If a shareholder wishes to retire, sell his shareholding or dies, it is far easier to transfer ownership PLC than a non-registered business structure.
Some of the rental markets e.g. renting to business, insurance, advance rentals and relocation's would prefer to rent from a PLC. Business to business has better protection for both sides and having a PLC can provide a more professional image. If you are doing business with a large companies, you may find that they prefer to deal only with PLC rather than sole traders or partnerships.
Why you shouldn't
It is not law that you should
It cost to set up a company, filling your accounts etc every year for each property can become expense (schedule a meeting with our finance team this is something we can help you with)
Property portfolio and Loans
When you have your properties under one PLC banks are happy to borrow you a lot more money. When you have different PL's you will not be able to borrow as much to develop your portfolio, there are way around that but you need a good account, (schedule a meeting with our finance team they can help you with the set up)
Worries about paying corporation tax, with the right account and the right set up you don't have to
Before a tenant can take you to court for something happening to them in your property like a slip or a fall, or any other random thing and believe me it happens a lot more than you think. Long time before you need to worry about your PLC protecting your properties, or your own personal income. You insurance will cover it. If you are properly insured the chances of someone forcing you into bankruptcy or foreclosure will be very difficult and take many years. An insurance claim averagely takes 6 to 9 months. It's more expensive to have every property on a PLC than to just have insurance.
WHATS BEST FOR YOU!
Landlords - Free accounting, property business, assessment setup & advice
There are pros and cons to both Self Certification and Limited companies (PLC). Which option is best for depends on your particular circumstances. It's important to have your current and future property plans assessed to make sure your set up in the way that best benefits you.
There is more on different property business setups and choosing the best structure for you. Do not hesitate to contact us for advice, accounting and way forward