Author Topic: [CANADA] Incorporating for rental properties  (Read 1383 times)

West996

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[CANADA] Incorporating for rental properties
« on: March 09, 2018, 11:57:39 AM »
So my wife and I just bought our first rental property and I was wondering if we should incorporate or not. I'm told it is about $2000 in fees to do it. Can anyone point me to a resource or explain to me what the advantages would be? Also I was told I might be too late already because I should of had the corporation before I bought the property, is that true? Any help or insight would be greatly appreciated.

K-ice

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Re: [CANADA] Incorporating for rental properties
« Reply #1 on: March 12, 2018, 02:25:52 PM »
Posting to follow, bump your post, and offer my very uneducated 2 cents & hearsay.

I know of someone who has a rental property with a numbered company. It seams like a hassle. The main advantage, as I see it, is keeping it separate for litigation reasons.

As far as I know there is no tax advantage, even a tax disadvantage. I think the company is taxed at 50% or the highest possible bracket regardless of income. They intentionally pay out family members who do legitimate work so the company makes nothing every year.

I think their can be tax advantages but only once the company has 5 full time employees or something. I haven't googled this recently, I am pulling this out of my a$$.

The friends I know recently bought another property and didn't bother with the numbered company so I don't know if that says anything.

As far as having the company first, that would probably save you some money since  you will need lawyers to change title to a company but I don't see what you can't still do it. Probably better to do it sooner rather than later because so their are no capital gains.

The people I know had some issues because they had a personal loan for the down payment of the property given like 15 years ago. Just recently, the company paid them back. So I'm not sure how all that works but something to look into. Finally, I would assume mortgage rates are higher for a company than for individuals.



   


rocketpj

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Re: [CANADA] Incorporating for rental properties
« Reply #2 on: March 25, 2018, 07:56:27 PM »
I bought my rental property with a corporation, after consulting with my accountant.

Taxation is an issue - CRA taxes profit from certain 'passive' rental streams at 50% (campgrounds, storage etc).  Other rentals are taxed much lower.  The solution is not to make a profit - pay it all out in wages and other costs (i.e. vehicle, phone).  Make sure to keep detailed records of how much work you are paying yourself and family members for (lest you be accused of 'sprinkling').  CRA won't be able to argue with paper records of work done....

That said, if you have a corporation when you buy a commercial property you don't have to cough up the GST, which can be a lot of money.

On the accountant's recommendation I added my wife as a Class B shareholder as well, so that when it is time to sell we can control how much goes to which one of us.

Freedomin5

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Re: [CANADA] Incorporating for rental properties
« Reply #3 on: March 26, 2018, 07:49:26 AM »
A good accountant and a good lawyer can help you work through the details of your particular situation to see if a holding company may be good. We use a holding company because there are multiple properties and some legacy issues (parents wanting to pass properties onto kidsupon desth  without incurring heavy taxes) and some other complications.

My experience is that itís easier getting a mortgage (lower interest rates) when itís not purchased by a corporation. When buying properties using the corporation, we need to use a line of credit with a slightly higher interest rate. But I think thatís because the corporation is structured so that it doesnít make very much money. Apparently, itís all debt-financing. Some of that is over my head so Iím afraid Iím not much help.