Do you incorporate?

6 Replies

There are advantages both ways.  If you are only going to have 1 or 2 rentals then your personal names may be best since there are ongoing tax returns etc that must be done for the company.

The advantage of putting it into a company name is that you can then structure it to pay less in taxes.  Check with your accountant for details on that.  And there is also the advantage of estate planning with the company.  

When you have it in the company, you can leave the company to your children and then they can take over the ownership without having to pay land transfer tax etc.

Your accountant is the best place to get answers on this and your estate planning lawyer can also help with questions.

I always recommend you have an LLC. And one for each property as you acquire it if you're holding them. Master LLC, then have a holding company that owns the properties, if you do rehabs start your own construction company even if you don't do the work, just be the GC. Have a Management Company, not to be the leasing office but to manage the business and if you start acquiring a lot of properties a financial services company which just manages the money.

Most lenders wont loan you money without being an entity. Most investors wont either. They want to loan or invest with an entity.

LLC is not a valid business structure in Canada.

You will have to incorporate to limit your liability. In terms of tax benefits, it is considered passive investment until you have 5 full time employees. So the benefits are negligible.

Originally posted by @Dan Zupancic :

qualifying for financing as incorporated in Canada is more difficult and at higher rates.  You dont need to incorp till you hit 5+ properties and even then discuss with your accountant.

That is not necessarily so.   

If you are borrowing against residential properties owned by a holding company, all shareowners of the company will be required to personally guarantee the financing just as if you held the property directly.   We've financed many properties in such a scenario and the rates were no different than when a property is owned personally.

However, I do agree that a holding company is typically unnecessary overhead when first starting out, but that is dependent on your personal financial situation, marginal tax bracket, etc.   A sit down with your accountant to determine a strategy for if/when and how properties should be transitioned into a holding company is definitely in order.