Reuse of an existing company and any (tax) consequence of doing so?

[stax]

Hi,

I was just wondering if my parents have a company which doesn't have much assets and the only liability is a loan to a director, can I use this company and what are the risks involved?

The liability relates to payments that were made by my parents for which the company never repaid. Can they "write off" this amount and then give us the company to start up our own business? Is there any tax consequences of writing this amount off?

Thanks for your replies in advance!

Regard,
Stax.

 

[McLovin]

Depending on the nature of the loan (interest payment/term etc) it may actually be considered an equity contribution. I'm not going to give you tax advice but you do need to be careful when you just write off anything that is related party, especially if they then use the write-off to offset other income. Probably best to speak to an accountant or just start a new company.

 

[stax]

Depending on the nature of the loan (interest payment/term etc) it may actually be considered an equity contribution. I'm not going to give you tax advice but you do need to be careful when you just write off anything that is related party, especially if they then use the write-off to offset other income. Probably best to speak to an accountant or just start a new company.

Hi McLovin,

Thanks for your reply. I realised that I wrote that the loan TO a director when it should be FROM a director. Hence, the Company actually owes the director money but the director now wants to write off the debt so as to clear the books.

Cheers,
Stax.

 

[McLovin]

Hi McLovin,

Thanks for your reply. I realised that I wrote that the loan TO a director when it should be FROM a director. Hence, the Company actually owes the director money but the director now wants to write off the debt so as to clear the books.

Cheers,
Stax.

Yes, I understood that part. Again, it can get tricky because it's a related party. If the director just writes off a loan and then claims uses that loss to offset other income it can raise some questions about the nature of the "loan". A related party loan still needs to be on commercial terms to qualify as a "loan".

 

[bellenuit]

I think paid $940 to buy a shelf company in 2000 in WA. That may be a lot cheaper to do than taking over the existing company and then obtaining legal/tax advice regarding their current situation. Also, no skeletons in the closet to be discovered later.

 

[Julia]

I think paid $940 to buy a shelf company in 2000 in WA. That may be a lot cheaper to do than taking over the existing company and then obtaining legal/tax advice regarding their current situation. Also, no skeletons in the closet to be discovered later.

I paid about half that to buy a company in Qld August last year.

 

[stax]

I think paid $940 to buy a shelf company in 2000 in WA. That may be a lot cheaper to do than taking over the existing company and then obtaining legal/tax advice regarding their current situation. Also, no skeletons in the closet to be discovered later.

Looks like that might be way to go with a new company and not have issues arising later though we thought it might be easy and cheaper doing this method as we have been quoted for $1,100 to setup the company.

 

[Julia]

Looks like that might be way to go with a new company and not have issues arising later though we thought it might be easy and cheaper doing this method as we have been quoted for $1,100 to setup the company.

Suggest you get some more quotes. There are plenty of online organisations.
Here's just one example:
http://www.trustdeed.com.au/company-registration.html?gclid=CP-Zz_Wt2K0CFSNLpgodRkzBNQ

 

[stax]

Suggest you get some more quotes. There are plenty of online organisations.
Here's just one example:
http://www.trustdeed.com.au/company-registration.html?gclid=CP-Zz_Wt2K0CFSNLpgodRkzBNQ

Julia, thanks for the link!