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Business Structures: Look Through Companies (LTCs)

A look through company - “LTC” is another example of a hybrid entity and is another structure that can be used.

Overview

A LTC is a company, and to be eligible various criteria must be met. The main criterion is that a LTC has five or fewer look through counted owners. There are various rules that define who the look through owner is

Advantages

A LTC is a company and therefore has the primary benefit companies provide - limited liability. It is also the company that is required to return taxes such as GST, PAYE, FBT etc, however income tax is not dealt with at the entity level.

From an income tax perspective, it is transparent which means that profit (or loss) passes through to the look through owner in proportion to their shareholding. As a result, tax is imposed at the individuals marginal rate. Alternatively, if a loss is recorded, the loss can be offset against other income (subject to the loss limitation rules).

Disadvantages

There are various disadvantages when a LTC is used. For example, the number of look through owners is limited to a maximum of five. There are also some complex rules that are found within the LTC legislation that relate to various situations such as loss limitation and changes in shareholding.

If you have any questions or would like to know if an LTC is the right choice for you, please contact us.