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  • Entrepreneurs

    How to use Companies House for due diligence

    Unless I'm missing something...In general I feel it's unlikely that net assets are likely to be positive in an investment business, as if all the equity is a director's loan, the company will appear unsafe when it is perfectly stable.

    E.g. an investor wants to buy a 100k property and sets up an LTD to purchase it. 

    The asset is worth 100k, but the 75k mortgage + 30k director's loan which covered the deposit/fees/minor works results in -5k net assets. The business may be perfectly viable and the rental cashflow adequate but on paper it fails the net asset test.

    For an investment or a development company, if the profit is withdrawn as salary to make it tax deductible, the same result will occur.

    Only after several deals will any profit that is left in the company over and above the original director's loan improve the net asset position.



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