Group investment

Question from Jo updated on 3rd April 2012:

We are thinking of setting up an entity for future investment properties - separate to our personal home/investments. There would be six people equally involved in this entity for the long term. What sort of structure is best moving forward with the changes to LAQCs?

Our expert Mark Withers responded:

The old LAQC strusture and the new LTC structure both have a limitation of five shareholders only. Individuals are regarded as one look through counted owner if they are relatives connected up to the second degree of blood relationship. There are also specic look through count rules if the shareholders are trusts. So despite haveing six people you should investigate if you would still constitute a group less than five look through counted owners and thereby be able to use a LTC. Standard companies have no such limitations but it is a relatively restrictive structure for convetional property investment. A standard partnership could be a possibility, remember all partners carry joint and several liability. There can also be tax consequences on entry and exit of partners. A limited partneship is a relatively new structure that is popular where there are foriegn investors involved but it may be a more complex structure than would be appropriate. If you are all family members a trust may even work. I suggest you all get together with an advisor and look at the relative merits of each option. Remember to check to determine if any of the six could taint the entity by association to development activity.

Mark Withers and his team at Withers Tsang & Co specialise in advising on property related transactions, valuation and restructure services and tax planning.

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