Many people have been sold on the benefits of a look through company (LTC), however, there are disadvantages. These include:
- An LTC is usually the wrong structure if you are making profits.
- Changing from an LTC can be costly and it can generate large taxable profits for which the shareholder are personally liable.
- Shareholders may need to personally fund their share of the tax due on the company’s profits.
- A company can lose its LTC status without the owners being aware that this has happened. Tax consequences will result.
- An unhappy ex spouse or ex business partner can easily and legally sabotage the LTC, causing the other shareholders to have huge tax complications.