COMPANY LAW ASSIGNMENT

Company Law Assignment

Company Law Assignment

(i)

There are both advantages and disadvantages for Black Books Plc for raising capital through loan rather than share capital, but the advantages are more important. Raising capital through debt or loan through mortgage gives individuals and companies the ability to buy property such as office space, manufacturing facilities and warehouses. Here are our top ten advantages to taking out a commercial mortgage. When company take out a commercial mortgage to purchase a property, company legally take ownership of that property asset. As a general rule, property prices tend to rise over the long term in the UK, and therefore, if company hang onto the property for a given period of time company will be able to make a profit when company sell it on (Hansmann, 2004, 349).

Tax back on repayment interest: Imagine if company could do this with your own home! The interest payments on your commercial mortgage are an allowable expense for tax purposes; company can claim them back against your tax bill. HM Revenue and Customs (HMRC) will permit company to claim the interest payments on a commercial property loan as an expense when calculating what tax company are liable for.Cheap Borrowing: Some businesses borrow commercial mortgages to consolidate other business debts, in much the same way that households have done with residential mortgages in the last ten years. If your business is paying a high interest rate on an overdraft, unsecured loan or credit card it might be more cost effective to use a commercial loan to pay these unsecured borrowings (Hansmann, 2004, 349).

Rental incomes: When purchasing commercial premises, some businesses acquire property that is too large for their present needs. While they can utilise the premises to expand in the future, it also creates potential for sub-letting the space in the immediate term in order to generate additional streams of income to help repay the mortgage. This is a legitimate practice, but company may need your mortgage lender's permission to do this. Cash Flow Eases: Touched on earlier in the list with stability, a commercial mortgage is going to be easier on the cash flow. With commercial mortgages being spread over decades there is little volatility in the mortgage payments, allowing company to focus solely on the profit/loss margins of your business.

Company are in control: Instead of raising a loan by selling a percentage of your business or property to an investor, company retain complete ownership if company have a commercial mortgage. A private investor would demand a share of any increase in the property value whilst a bank or mortgage lender is only entitled to an interest return on the mortgage. Company retain the benefits of ownership of an asset that is likely to grow in value. Company Keep The Capital: A commercial mortgage by its nature is not a black hole that will bleed company company dry of every last penny of capital. Company will need some capital for the deposit, but the rest obviously comes from ...