Individual vs Corporation: Which Entity Should You Use To Invest In Commercial Real Estate Property?
Considering buying a commercial real estate property, but undecided whether to do so as an individual or a corporation? This decision is far more complex than a single-line answer! Keep reading to discover a comparison of each structure.
Firstly, let’s say that you purchase commercial property, and someone is injured on the property that you own. Accidents like this are more common within commercial real estate; therefore there is generally a higher risk of liability when investing commercially.
In order to avoid the pitfalls associated with this situation, incorporation can ensure that your personal assets are safe with limited liability protection. This is an advantage of incorporation, as individuals are individually liable for any incidents that may occur.
Next, we can glance at the start-up and maintenance costs for each entity. If you choose to purchase a property with a corporation, you must pay startup costs, which include not only incorporation fees, but it is recommended to hire a professional for the process and documentation to avoid possible high-cost mistakes. Once you are set up, there are ongoing fees as well, for example, hiring a licensed professional to file your annual corporate tax returns. On the other hand, as an individual, you avoid most of these corporate fees, although it is recommended to create a separate bank account for each property.
Third, there is the aspect of taxes to consider as