“Should I incorporate my rental properties or own it personally?”
That’s the question that I had before and after buying my rental properties.
Whether you’re a newbie investor looking into owning 1 rental property… Or an experienced investor owning a variety of rental properties.
Most likely, you will face this question at some point in your real estate investing journey.
I know I did, and believe me, the thought of whether to incorporate or not confused the heck out of me for a long time. 🙂
When I was researching online, I found many articles about LLC or corporation structure mainly for real estate investors in the US.
It took me a while finding useful information on this subject for Canadian real estate investors.
Which is why I’ve rounded up the articles and posts in hope that it will help other investors, like me, who aren’t sure what to do.
Some articles support the idea of rental properties incorporation and some don’t.
Keep in mind that – Before you make any changes, please consult a professional lawyer, accountant, or any other professionals to assist you with your final decision.
Let’s get to the list, shall we? 😀
This Q&A style article from MoneySense was written by Bruce Sellery, author of The Moolala Guide to Rockin’ Your RRSP. In the post, he mentions that “Run a dental practice – start a corporation. Run a rental property business – don’t bother.”
In addition to this “straight to the point” statement, Bruce gives a strong supporting argument base on knowledge from a certified accountant explaining whether if there are any tax saving benefits if you are a landlord wondering if you should incorporate your rental properties or not.
In my experience, I think there is a lot of misconception on the rental income tax benefits under an incorporation; most people I’ve talked to thought you get taxed less when your rental income is held in an incorporation.
Which is actually not entirely true. Many people confuse the tax rate for an active business income with a passive business income.
If you went through the same confusion as me, definitely read this.
Since reading this post, it has given me a different, but helpful knowledge, when it comes to rental properties incorporation.
This is another Q&A style article from MoneySense. It was written by Evelyn Jacks, tax expert, author, and founder and of Knowledge Bureau in Winnipeg.
Read this if you’re an investor looking to see if it’s worth your time and money to transfer rental properties from your personal name to an incorporated company name.
Evelyn gives a good comparison of the pros and cons when performing this major change in your business structure.
Personally, I really like how she gives the reader enough information to evaluate the idea of incorporation from both sides while talking about the essential things that you need to consider once you decide to make that move.
This is an article posted on WhichMortgage and written by Don R. Campbell, best selling author, investor, researcher and founding partner of the Real Estate Investment Network, aka REIN.
Don is very popular amongst Canadian investors because of his top-selling books, in particular, Real Estate Investing in Canada. (Btw, the book is really helpful if you’re looking to expand your financial IQ.)
In this article, he offers his tax tips on incorporating investment properties from a guru real estate investor’s perspective.
He explains the difference between active and passive business income while letting you know when it makes sense for an investor to incorporate their real estate business.
Also, offering tips on how to make the mortgage on your own home tax deductible. Definitely a useful article.
If you’re a Canadian real estate investor, you must have heard of REIN. Basically, this is similar to BiggerPockets, but for Canadians.
This is an article posted on Real Estate Insider Blog and written by Darren Richards, LLB and George E. Dube CPA, CA; Darren is a reputable lawyer focusing on residential and commercial real estate law and George is a trustworthy accountant and longtime real estate investor.
I really like how this article breaks down all the advantages of incorporating a real estate business into its own section.
There are five main sections of this post:
- Overall flexibility
- Legal benefits
- Tax advantages
- Mortgage qualifying
- Organizational/professional considerations
Each section is well-written with different situations showing how incorporating would be helpful in those scenarios.
Definitely, it’s nice to read an article written by both a lawyer and an accountant. These two professionals are so important when it comes to deciding on whether or not you should go ahead with the incorporation process.
The BDO Real Estate Investor Blog published this article. It is again written by George E. Dube, real estate accountant, investor, speaker, and author.
This is an easy-to-read article with many straightforward points giving you a good idea of what to expect when you move your real estates from your personal name to an incorporation.
Another interesting read from an accountant’s perspective about rental properties incorporation.
This article is written by Kevin Davidson, CA, CFP, Business Growth Strategist.
Kevin emphasizes that we shouldn’t look at running our real estate business based on numbers and taxes point-of-view.
He supported his points with good arguments throughout the post.
Then he further describes how he integrates active business with his real estate to reduce taxes.
This is an informative post written by Josh Zweig from LiveCA.
It’s only a 7-minute read but it is packed with tons of useful information!
Josh lists out the most common ways to purchase an investment property while keeping the explanations simple and straight to the point.
On top of that, he mentions the possible factors that you might be facing depending on how you buy the property so that you’re well-educated when you finally decide which option works best for you.
This article is written by Cherry Chan, a real estate accountant in Canada.
For those of you who aren’t familiar with the possible setups in a corporate structure. This post is for you.
Cherry goes in-depth and examines the 3 most common types of company structures while giving you the benefits and pitfalls.
- One corporation, multiple properties
- One corporation, one property
- Three tiered corporations
She explains each type in point forms which makes it easy to read and even simpler to understand.
In addition to this article, Cherry’s site also offers other essential tax tips for Canadians, so you can binge read those on your own time.
A Final Note
When I started real estate investing, I didn’t know anything about incorporating rental properties.
The articles in this post were extremely helpful because they provided me the guidance and clarifications that I was looking for.
I hope that the posts here were able to help you gain the knowledge that you need to make your next move.
At the end of the day, there is no one-size-fits-all answer when it comes to rental properties incorporation.
As mentioned before, please consult with your lawyers, accountants, or other professionals that you should consult with before making a final decision.
Also, make sure you ask tons of questions before making your decision because making a wrong one could potentially be an expensive mistake.