In GRA's view they are a potentially effective ownership structure and it is short-sighted to dismiss them merely because they contain some complex rules. These are things that do not necessarily exist in personal ownership.
There is more flexibility for tax planning in terms of effective debt structures and potentially remuneration to working spouses. This is something that can be moved into trust protection. With an LTC being a separate legal entity, you develop a shareholder loan when you inject money into the LTC. LTCs offer better planning for asset protection. It is true that movement of shares can trigger depreciation recovery in the same way that movement of property from personal ownership can, but there are exemptions from depreciation recovery in the context of LTCs that are not available with personal ownership. On the other hand with an LTC you can move the shares without incurring the same legal costs. If you own property personally, you then have legal costs to convey titles if you then want to restructure ownership into a trust for example. Often investors like to hold loss-making assets personally so as to take advantage of tax losses, but do not envisage this necessarily being a long-term structure. This may be less pressing in the context of residential property investment, but still a point worth noting. Although an LTC is transparent for income tax purposes it is a separate legal entity so that it does provide a layer of limited liability protection. This is because we see LTCs as having advantages over personal ownership such as the following: Our view is that an LTC is often the right structure. While there is some accuracy to the above statements, it is not a view shared by GRA and we think that practitioners are doing their clients a disservice if they immediately write off the use of an LTC. Following this, don't bother setting up an LTC when holding the property personally will produce largely the same results without LTC complexity. Owning the property personally is simpler and you avoid the compliance and complexity of an LTC. If you own the property personally you get to utilise the tax losses in just the same manner as if you owned it via an LTC. Often the arguments go something like this: It is not unusual for us at GRA to hear about other advisors warning their clients against using LTCs. 
only natural persons, trusts or other LTCs can be shareholders in an LTC).
There are restrictions on what companies can qualify for election into the LTC regime, which shortly stated include limits on the number of shareholders and restrictions on who the shareholders can be (i.e. There are various rules, some of complexity, embedded within the LTC legislation including loss limitation rules, prohibition on declarations of shareholder salary and consequences on moving shares and exiting the LTC regime. From a tax perspective it is "transparent", which means that profits and losses produced by the activity undertaken by the company are deemed for tax purposes to be profit or loss of the shareholder. In all other respects it is an ordinary company. An LTC is a company that elected into the look-through company regime for tax purposes. One of the questions we get asked most regularly at GRA is whether or not a look-through company (LTC) is the appropriate structure for proposed property investment activity.īefore we touch on our view in relation to this, I want to confirm some basics in relation to LTCs:
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