Setting up an SPV
We recommend that you form a limited corporation before beginning to build your property portfolio. This involves creating a limited business with Companies House and registering for taxes with HMRC.
Name of the company
This is the fun part – deciding on a name.
Many MPH Sports athletes have their initials as well as their shirt number
For instance, LP 8 Property Investments.
Once you've decided on a name, the following step is to ensure that it's still available. Companies House and the Intellectual Property Office will reject names that are already in use or are too similar to current registered names, therefore this is an important element of choosing a suitable business name.
Companies House provides a WebCheck service to search against names in use.
The IPO has a similar tool to check against all registered trademarks in the UK.
This might be your home address or a registered office address obtained through a paid service or supplied by your accountant. Consider your thoughts about privacy at this point. Remember that your business's registered office data will be widely available in the public domain: they appear on all official communications; they must be included on all letters, invoices, and contracts; and they are available on all company records filed with Companies House and other agencies.
When forming your company, you must appoint at least one director.
While being a director is a great feeling and experience, it does come with certain obligations. Directors are responsible for adhering to legal obligations and maintaining the yearly accounts. While it's likely that you'll enlist the help of an accountant for most of this, you must still guarantee that you have proper control because you are legally liable. A lender would commonly require a "personal guarantee" from each business director when borrowing money through a limited company. This means that if the company is unable to pay its obligations, the directors will pay them personally.
For example, if your company falls behind on mortgage payments, the bank may require the directors to make repayments personally.
You must designate at least one shareholder who may also serve as a director.
A shareholder is a person who holds stock in a company. This typically implies they have voting rights and control over how the firm is operated. Dividends are given to shareholders based on the amount of shares they own. It's an important aspect of ensuring your company runs as effectively as possible, so devise a method of distributing company shares that works for you. Spouses and even children are common shareholders who earn a portion of the company's revenues.
Types of share structure for property companies
Ordinary shares are the most popular form of share and indicate proportional ownership in a corporation. Each share entitles its owner to one vote.
Each share entitles its owner to one vote per share.
Alphabet shares allow a company to allocate shares with distinct classes (identified by a letter), for example, to pay different dividends or to provide specific shareholders decision-making authority.
Establish who has considerable power over the company.
Companies House wants information about the persons who own or control your firm when you incorporate it. Anyone who possesses the following characteristics is considered to be in a position of substantial control:
- more than 25% of the shares
- more than 25% of the voting rights
- the authority to nominate or dismiss the majority of the board's members
Examine the SIC code
When forming a property company, there are 2 potential standard industrial classification (SIC) codes:
- Use the SIC code 68209 if you are purchasing and letting (also known as buy-to-let or portfolio investing).
- Use the SIC code 68100 if you are buying and selling (also known as flipping or trading property).
Set up a business bank account.
Other practical considerations should be made, such as creating new bank account in the company's name and providing enough insurance coverage.
The procedure for opening a business company bank account varies significantly between banks, however the general criteria is as follows:
- Complete a ‘Company Bank Account’ application form
- Present your company’s ‘Certificate of Incorporation’ and ‘Memorandum of Articles and Association’
- Present Proof of Identity
- Present ‘Director’ and ‘Company Secretary