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Buying a property through a company - Have I made a huge mistake ?

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  • Buying a property through a company - Have I made a huge mistake ?

    Hello,

    I finally found the right property and made an offer in my name that was accepted and put down a 10% deposit.

    I made the offer under my name "and/or nominee" as I was intending to set up a company if the offer was accepted, which it was, and buy the apartment through the company.

    Its a new build about a month or two from completion. So i thought i had loads of time to set up a company.

    Yesterday at a BBQ I was talking to a friend and she said the company had to be formed/registered before I made the offer. i.e I can't set up a company between the offer being accepted and completion date.

    I didn't think she was right but right now I feel like a complete idiot.

    Has anyone purchased a rental property through a company which they set up after there offer was accepted and they paid the deposit?


    Mel

  • #2
    Your friend is right. You have a problem talk to your lawyer and see if there is a solution.

    Comment


    • #3
      Of course you can. You haven't settled yet have you?

      Comment


      • #4
        No idea what Bob's on about. You can absolutely set up a company after the document is signed, but prior to settlement date. There's no problem there at all. But do make sure it's set up soon in case there are any difficulties. No sense in waiting.
        AAT Accounting Services - Property Specialist - [email protected]
        Fixed price fees and quick knowledgeable service for property investors & traders!

        Comment


        • #5
          Thank you! I appreciate all of you replying to my question. Feeling a little better

          I have paid the 10% deposit but I have not settled. Settlement is 2-3 months away.

          Anthonyacat does the fact I have paid the deposit from my personal bank account and not the company bank account, as the company is not set up yet, cause a problem from an accounting or tax perspective?

          Comment


          • #6
            Not from a settlement perspective but from now on suggest you ..
            See an accountant is the best advise we can give you.

            Comment


            • #7
              Originally posted by Mell046 View Post

              Anthonyacat does the fact I have paid the deposit from my personal bank account and not the company bank account, as the company is not set up yet, cause a problem from an accounting or tax perspective?
              It's quite common for the directors of a company to lend the company their personal funds. Especially on startup when the company has none! Keep track of what the company owes you (your current account) for accounting purposes.
              My blog. From personal experience.
              http://statehousinginnz.wordpress.com/

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              • #8
                Can someone remind me what the problem is here?
                Could there be tax implications if the wrong entity is used?

                Comment


                • #9
                  It's a GST problem.
                  Unless the law has changed, if you buy a property and set up a company after that date IRD will not allow the input claim refund, but will make you pay GST on sale.
                  Last edited by Bobsyouruncle; 16-04-2017, 06:02 PM.

                  Comment


                  • #10
                    Originally posted by Bobsyouruncle View Post
                    It's a GST problem.
                    Unless the law has changed, if you buy a property and set up a company after that date IRD will not allow the input claim refund, but will make you pay GST on sale.
                    But GST is only applicable for traders. As it's a new build, it's unlikely that Mel plans to trade it.
                    As she's planning to settle in the company's name, there will be no on-sale and no bright-line trigger.
                    My blog. From personal experience.
                    http://statehousinginnz.wordpress.com/

                    Comment


                    • #11
                      Correct but the OP hasn't said why a company, so I was just explaining what the problem is/could be.

                      Comment


                      • #12
                        Thank you everyone for your comments.

                        Apologies for not being clear Bobsyouruncle.

                        I am not a trader nor looking to become a trader. I simply want to rent the property out when its completed, so a buy and hold type strategy.

                        Comment


                        • #13
                          Thanks Bluesky and Sidinz, appreciate your comments.

                          Good point about lending to the company!

                          I will be speaking to my accountant next week when he is back in the office to sort this out.

                          Comment


                          • #14
                            Originally posted by Bobsyouruncle View Post
                            Correct but the OP hasn't said why a company, so I was just explaining what the problem is/could be.
                            Actually in your 1st post you didn't explain anything at all - just left a big question.

                            Comment


                            • #15
                              Nothing wrong with setting up a company post-agreement but pre-settlement, unless you're bringing GST into the equation.

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