Rental Property Investor · Ottawa, Ontario · Member since 2018 · 52 posts · 13 votes
I just bought my first property in Canada, a duplex with 5 tenants, and for various (most tax related) reasons, I have decided to operate the rental as a sole proprietor.
I'm considering whether to register a business name to operate my rentals under, mostly to have a greater degree of privacy and professionalism. I came from the US, where I felt most comfortable operating my rentals under an LLC I owned, but that option is not available here in Canada and for various reasons, I don't want to form a corporation.
Do any of you sole proprietor Canadians operate your rentals under a business name, or do you just use your real name? What are the advantages and disadvantages?
I'm in Ontario if that matters. Some drawbacks to using a business name that I am noticing are that one must pay $80 for each registration or renewal, and the name must be renewed every 5 years. And maybe one would need to get a Master Business Licence??
Kate: If you are operating as sole proprietor you can use an operating name "doing business as". This can either be officially registered or just used in practice.
Yes, that's what I am thinking of doing, using a "doing business as" name. But it seems that in Ontario, a sole proprietor would need to register the doing business as name? And maybe also obtain a Master Business Licence??
Real Estate Investor · Montreal, Quebec · Member since 2015 · 95 posts · 42 votes
7y
Hello Kate,
1) are you a us citizen or canadian? important to look at double taxation, might want to create a partnership since it's recognized in both countries
2) are you buying these properties cash or financing through the banks? Bank probably won't allow you to do this since it's your first property and not enough collateral.
3) What's your primary source of income? Do you work for a company? i.e. you have T4s? or self employed?
Rental Property Investor · Ottawa, Ontario · Member since 2018 · 52 posts · 13 votes
7y
1) US citizen and Canadian PR. I didn't go the corporation route partly because of the double taxation issue. I can't create a partnership as I am the sole owner. I decided on sole proprietorship but am considering whether to use a business name rather than operate under my legal name.
2) Cash
3) Currently working for a company, but I'm not sure for how much longer. Eventually my income will likely be equally distributed among rental income and self employment income (another unrelated business that I will likely incorporate with non-US citizen partners).
Btw I'm also interested in investing in and spending some time in Montreal in the next few years.
Rental Property Investor · Toronto · Member since 2018 · 126 posts · 106 votes
7y
I just talked to my accountant today about this. I learned today that if I put my properties in a Corp I would still have to personally gairantee a mortgage since it has no credit history or income. I can still be sued since I would be a director of the Corp and anyone who is going to sue will do so to the corp and director. Also under j.t. and the liberals my corps passive income will be taxed at 54%. Also tax returns on a Corp are more than personal ones. So I'm not buying under a Corp. Apparently I can earn up to 203k$ in rental income before I have to pay 54% tax and I don't earn that yet. And you can still have write offs without a Corp.
Rental Property Investor · Ottawa, Ontario · Member since 2018 · 52 posts · 13 votes
7y
Glad to hear of another person confirming my decision not to put my property in a corp. But operating as a sole proprietor, do you operate your rentals under your legal name or under an assumed name? I'm debating whether I should register an assumed business name, not for tax reasons as I would still be just a sole proprietor, but for more privacy (so my legal name is not thrown out everywhere) and for a more professional image.
Rental Property Investor · Winnipeg, Manitoba · Member since 2017 · 8 posts · 4 votes
7y
I use an “assumed name” which sounds like a PM to deal directly with tenancy issues, even if the property is purchased under my legal name as individual.
I just talked to my accountant today about this. I learned today that if I put my properties in a Corp I would still have to personally gairantee a mortgage since it has no credit history or income. I can still be sued since I would be a director of the Corp and anyone who is going to sue will do so to the corp and director. Also under j.t. and the liberals my corps passive income will be taxed at 54%. Also tax returns on a Corp are more than personal ones. So I'm not buying under a Corp. Apparently I can earn up to 203k$ in rental income before I have to pay 54% tax and I don't earn that yet. And you can still have write offs without a Corp.
David:
Your CCPC's passive income would have been taxed at the full corporate tax rate even before the changes introduced by the government last year.
When you operate as a sole proprietor, your rental income is combined with your income from other sources to determine your effective tax bracket. So, unless you are already a high income earner, there is little tax advantage to holding properties in a corporation.
The biggest advantage to a corporation comes with size or when you have other players involved.
Glad to hear of another person confirming my decision not to put my property in a corp. But operating as a sole proprietor, do you operate your rentals under your legal name or under an assumed name? I'm debating whether I should register an assumed business name, not for tax reasons as I would still be just a sole proprietor, but for more privacy (so my legal name is not thrown out everywhere) and for a more professional image.
Kate: If you are operating as sole proprietor you can use an operating name "doing business as". This can either be officially registered or just used in practice.
Kate: If you are operating as sole proprietor you can use an operating name "doing business as". This can either be officially registered or just used in practice.
Yes, that's what I am thinking of doing, using a "doing business as" name. But it seems that in Ontario, a sole proprietor would need to register the doing business as name? And maybe also obtain a Master Business Licence??
Rental Property Investor · Ottawa, Ontario · Member since 2018 · 52 posts · 13 votes
7y
Originally posted by @Account Closed:
I use an “assumed name” which sounds like a PM to deal directly with tenancy issues, even if the property is purchased under my legal name as individual.
Did you have to officially register your assumed name with your province?
I use an “assumed name” which sounds like a PM to deal directly with tenancy issues, even if the property is purchased under my legal name as individual.
Did you have to officially register your assumed name with your province?
Kate: If you are operating as sole proprietor you can use an operating name "doing business as". This can either be officially registered or just used in practice.
Yes, that's what I am thinking of doing, using a "doing business as" name. But it seems that in Ontario, a sole proprietor would need to register the doing business as name? And maybe also obtain a Master Business Licence??
Investor · Stouffville, Ontario · Member since 2011 · 213 posts · 65 votes
7y
And let's not forget the downpayment funds for buying in corp typically start at a min 25% down. Usually 30% or more based on the lenders appraisal.
Buying in a corp is best uses when you will have a large portfolio. vs a few properties. You can transfer them into a corp at a later date however you pay a land transfer tax.
This conversation is best had with a mortgage broker, lawyer and an accountant... Try getting them all to agree at the same time :)
Investor · Fredericton, New Brunswick · Member since 2015 · 16 posts · 3 votes
7y
Hi Kate,
I've been on the fence with the same question for some time now. I have 5 units (total of 20 bedrooms) and think it's time for me to pull the trigger on registering a legal name. As already said, there's nothing to gain from a tax perspective, however I'm thinking that the ~$80 to register is worth the a) professional presentation b) privacy and c) the placeholding of the name in the case that the business turns into something much larger (which I am expecting).
I've also been told that banks won't allow you to open a business account without a legal company name. This is especially important if you intend on setting up a direct withdraw payment system, or if you want tenants to write you cheques in the name of your "company". Perhaps others can weigh in on this as I'm only going through the process now.
If you have a registered "Doing Business As" (DBA) name for your business, you should be able to have that associated with the bank account for the business.
I've not encountered a bank that will not allow - or frankly encourage/insist - opening a small business account for a sole proprietorship ... but I've not dealt with a proprietorship for some time. If you are required to operate from a personal account, the only drawback may be setting up PADs for your tenant rent payments. Most of our tenants pay by Interac e-Transfer and we use it to pay many of our providers ... sending e-Transfers - and other service fees - with a personal account will usually be cheaper than with a business account.
I too own my properties in my own name, but I operate as Zed West Properties as a partnership in BC. I registered it, as that way I could open a bank account in the business name. It is more professional, as now I can have the tenants make the rent out to my business name rather than personal name. Also helps keep the finances separate for tracking purposes.
It also helps if you want to get trade/contractor discounts at hardware stores, anytime it can save you money is good!!
Rental Property Investor · Ottawa, Ontario · Member since 2018 · 52 posts · 13 votes
7y
For those of you who own your properties yourself and use an assumed name, can you use your assumed name on Landlord Tenant Board notices, including N1 Notice of Rent Increase for those of you in Ontario?
For those of you who own your properties yourself and use an assumed name, can you use your assumed name on Landlord Tenant Board notices, including N1 Notice of Rent Increase for those of you in Ontario?
If you have registered a "doing business as" (or assumed name in some jurisdictions), then you are doing business as that name. Correspondence with the LTB and tenants are part of business.
Hello, I live in Ontario and have two tenants, And making the move to have two more! Wonder if I can have the mortgage on my name and the rental agreement on my corporation?
Firstly, I have to say this thread is awesome! great job guys with all the responses. I'm heading the same direction. Have one property and will be adding (hopefully) one to two per year.
Can I be considered a sole proprietor now, with only one? (Tax benefits)
If so, do I have to do anything at the bank where the mortgage is as far as adding the business name to the mortgage?