Profitability of investing via Limited Company compared to private person : a cost-benefit analysis for a case company “X”
Ruohola, Tuomas (2022)
2022
All rights reserved. This publication is copyrighted. You may download, display and print it for Your own personal use. Commercial use is prohibited.
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:amk-2022060716218
https://urn.fi/URN:NBN:fi:amk-2022060716218
Tiivistelmä
The objective of the study was to find out for an imaginary private investor, who has gained already quite a significant investment portfolio and is working as a part-time entrepreneur and as an employee, whether there would be more beneficial ways to invest. The investor had thought of moving all the investing assets into a company and starting investing via it to gain benefits from the lower taxation - and to this rationality the study answers.
The study began by finding trustworthy theory on what there is needed to know on investing in general, but also investing as a private person and more importantly on investing as a company. There is more to it than the taxation and the theory collection part was to find all the possible information. The collection process began by reading books or websites relating to the subject. The authors were famous private investors, authors, or institutions, who either know a lot about the subject or are responsible for example taxation, loans, loan guarantees, and/or allowances. After the reading process began the collection process of possible references, that could be used in the study based on the imaginary investor’s situation.
In calculations in the empirical part was calculated different methods, and how the investor could invest in the future. These methods were compared with if decided to keep investing as has been done in the past so really see the effect on a 20-year timeframe. In addition to calculations, there is written recommendations and analysis on important things to note, if investing as a company.
The results were partly against the hypothesis the investor had in mind. This was actually because of the usage of investment loans, which usage, even at small amounts, diminishes greatly the benefits of lower taxation and the compound interest effect. The results were that for the investor’s portfolio and current situation, it is not wise to any of the current assets into the company, but rather invest all future profits into the company and start to invest via the company, but before doing so first take full usage of the equity saving account as a private person.
The study began by finding trustworthy theory on what there is needed to know on investing in general, but also investing as a private person and more importantly on investing as a company. There is more to it than the taxation and the theory collection part was to find all the possible information. The collection process began by reading books or websites relating to the subject. The authors were famous private investors, authors, or institutions, who either know a lot about the subject or are responsible for example taxation, loans, loan guarantees, and/or allowances. After the reading process began the collection process of possible references, that could be used in the study based on the imaginary investor’s situation.
In calculations in the empirical part was calculated different methods, and how the investor could invest in the future. These methods were compared with if decided to keep investing as has been done in the past so really see the effect on a 20-year timeframe. In addition to calculations, there is written recommendations and analysis on important things to note, if investing as a company.
The results were partly against the hypothesis the investor had in mind. This was actually because of the usage of investment loans, which usage, even at small amounts, diminishes greatly the benefits of lower taxation and the compound interest effect. The results were that for the investor’s portfolio and current situation, it is not wise to any of the current assets into the company, but rather invest all future profits into the company and start to invest via the company, but before doing so first take full usage of the equity saving account as a private person.