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Why opt to buy through legal entities?

Why opt to buy through legal entities?


PURCHASING PROPERTY THROUGH DIFFERENT LEGAL ENTITIES :


As an INDIVIDUAL

Properties form part of your personal estate thus exposed to any possible legal action by your creditors.

In death your total assets exceed R1.5mil; your heirs would pay a 20% estate duty on the excess.


Taxation: Capital Gains Tax


Why people opt to own properties within these Structures?

…that it protects the property owner against creditors as long as it isn’t offered as security against a loan.

Creditors cannot take legal action against you in your personal capacity of payment of debts of the entities.


CLOSE CORPORATION (cc)

Easily formed and operated (Set up R1000)

The CC ordinarily continues to exist as an entity, even in the event of death or resignation of member, thus elimination the need to pay transfer costs.


Taxation: advantageous for generated income, as to the write off cost such as upkeep and maintenance incurred on the property against tax.



Signing for register of property:

Transfer Duty to be paid on Purchase Price of property.

Signed by any authorized member on behalf of the CC


COMPANY (Pty Ltd)

Formation and running is complicated and needs accountant and tax expert.

Entity suits a business with a fairly substantial infrastructure.


Taxation: advantageous for generated income, as to the write off cost such as upkeep and maintenance incurred on the property against tax.


Signing for register of property:

Transfer Duty to be paid on Purchase Price of property.

Director needs shareholders to authorize transaction of any sale of property.


TRUST

Entered into between the founder or creator and people nominated by the founder (The Trustee) to administer the Trust on behalf of the beneficiaries. Which continues to exist as an entity despite the death of a founder, trustee or even a beneficiary?


  • Family Trust > provide the well being of children to avoid estate duties
  • Business Trust > created by investors for the purpose of the business venture. Beneficiaries have control over the trustees or their Trust Share in that they can freely dispose of their Trust Share as they see fit at any time.

ALL decisions of trustees must be taken jointly and unanimously – A majority decision does not suffice

= consent of the board of trustees must be obtained

Trustee of trust acts in the capacity only if authorized thereto in writing by Master of High Court


Taxation: taxed at the rate applicable to individuals at varying income levels.


Signing for register of property:

Transfer Duty to be paid on Purchase Price of property.

In agreement of Trustees or by Master of High Court

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