Partnership is the significant together of several persons or business inside a common undertaking or enterprise. From your accounting, taxation and legal perspective, you are able to trade your partnership through various buying and selling vehicles including companies and LAQC’s (loss attributing qualifying companies), joint ventures, special partnerships, general partnership, limited partnerships, or Trusts.

Each buying and selling vehicle must have a contract produced between your partners towards the investment outlining their obligations as well as their legal rights.

Inside a company for instance, this is accomplished inside a standard shareholders agreement. Inside a partnership, their bond agreement.

Inside a partnership, the partnership agreement etc. Which Buying and selling Vehicle? Choosing the correct structure is a mixture of analysing many factors and selecting the automobile that creates the best results for the specific situation conditions.

A short review of points to consider would come with the next (regarding partnerships from the property investor’s context):

1. The Implications of Asset Protection (including limited liability versus limitless liability for actions from the partnership, and liability for that banking obligations from the partnership through the partners)

LAQC’s require shareholders which are electing in to the LAQC regime to personally ensure the IRD for tax.

This is often managed for small shareholders, but is a asset protection consideration that must definitely be checked out.

And to be reviewed may be the question of in case your suggested structure is making money outdoors of the trust, therefore can you really have your losses accessible and contain capital gains within your Trust for asset protection and staying away from future gifting problems?

2. Versatility of possession: Are you able to change partners without triggering depreciation retrieved? The reply is ‘Yes’ to have an LAQC, ‘No’ for many partnership conditions.

3. Flow through of tax losses: will the buying and selling vehicle allow you to connect to the losses?

4. Flow through of capital gains: will the buying and selling vehicle allow quick access to capital gains in the finish from the investment, or is it necessary to liquidate (for instance a company will need liquidation unless of course it’s a qualifying company to gain access to capital gains tax free in NZ).

5. Mix border tax factors: for individuals investing off shore or mix-border, comlex tax issues could arrise? Like capital gains tax, non resident withholding tax, the implication from the Nz Accrual rules and foreign currency movements, and double tax on dividend earnings.

Generally as specialist property investment accountants, we advise using a specialist chartered accountant that will help you using these issues.