Do we need Limited Liability?

Your concerns are valid because it is logical to separate your business from your private life wherever possible. This can also be done using a Limited Company, but the transition from personal ownership to a company has many more considerations, in particular CGT and Stamp Duty.

One possible downside to an LLP is that you require at least two designated members. A limited Company only requires one Director and shareholder. Also, the members of LLP remain exposed to Section 24 restrictions on finance cost relief, whereas Limited Companies do not.

If you’re buying further properties, in most cases a Limited Company is the best way to go, ideally a Family Investment Company structure for maximum flexibility, tax efficiency and opportunities for legacy planning.

It is easy to set up an LLP or a Limited Company, you can do it online yourself for less than £100. However, whilst the cheap ‘cookie cutter’ approach is probably better than nothing, the structure will not be tailored to your circumstances. Think of your ownership structure as the foundations of your business. It pays to build on solid foundations that are sufficiently robust to withstand the potential for expansion. Rectification if/when you begin to discover problems is bound to be far more costly.

What insurance should a limited company have?

Reply to the comment left by JB at 17/09/2024 – 13:39
Are you able to be more specific or was it intended as a general question unrelated to this discussion thread?

Reply to the comment left by Mark Alexander – Founder of Property118 at 17/09/2024 – 13:44
What additional insurance should a limited company which owns and let’s property have? ie in addition to buildings insurance and liability insurance (often attached to contents insurance) for each property

Reply to the comment left by Mark Alexander – Founder of Property118 at 17/09/2024 – 09:12
When you have a Limited Company with generic property management article of association that is far from sufficient to avoid issues with the property that you already own.

Specifically your accountants will look at the Beneficial Interest of that property and move all transactions to the Directors Loan Account because only the Beneficial Owner can get the rental revenue not the Limited Company which doesn’t own it..

HMRC will still be after you on the Self Assessment, Property income section, so Finance Act, Section 24 tax liability.

Thus you are no better as a cookie cutter Limited Company Director than as a private person. You just have Accounting costs for no benefit without the proper Ownership structure.

It’s critical to get the correct advice for your situation IMHO

Reply to the comment left by PAUL BARTLETT at 17/09/2024 – 21:38
I agree with your final sentence but not the rest.

If beneficial interest is transferred to a company the taxation consequences follow that, including interest relief but also the CGT and Stamp Duty liabilities and the potential for reliefs associated with disposals and acquisitions. There is a significant amount of case law on this.

Regarding insurance if you are sole directors/partners of ltd/llp and only use the company to buy and rent out out property then each properties landlord insurance would be enough as it covers the mandatory “public liability” for example if a roof tile fell of and hit a member of the public you are covered. If you employ someone (anyone even your spouse) and even as a clerical worker you will need “employee liability” also. It’s very difficult to buy “employee liability” on its own without “public liability” so you end up have two “public liability” and need to check the underwriters are happy with this overlap. I use QuoteLineDirect as the are an advisory based broker and are fairy cheap. I’ve had to made claims in the past and they have been well handled.

Reply to the comment left by Mark Alexander – Founder of Property118 at 17/09/2024 – 09:12
Hi Mark

Thanks very much for the comprehensive reply. It is much appreciated.

Reply to the comment left by JaSam at 18/09/2024 – 07:45
Many thanks for your reply. I am sure there are directors who have been advised by their accountant to ’employ’ themselves and family members/shareholders under PAYE, who have unwittingly not realised they need to obtain employee liability insurance

The need for employee liability only applies to non-directors. If a director is on PAYE then this is exempt. However what could catch most out is a non-director listed as the company secretary even if never paid a penny. The reality is no one is going round checking / complaining especially if kept in the family.