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Updated about 8 years ago on . Most recent reply
Pros and Cons of Creating a Business Entity (in Canada)
Hi Everyone,
After doing lots of reading and research on the different investment strategies available, I am wondering what the BP community thinks about using a business entity to hold real estate? I am specifically wondering about this for Canadian real estate investment.
What advantages/disadvantages come with this strategy? When is it appropriate to create a business entity? Why do people choose to use it (or choose not to)?
Let me know your thoughts and opinions. Thanks!
Marco
Most Popular Reply
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There is generally little advantage - and often several disadvantages - to incorporate at the start of your investing career. However, depending on your marginal tax rate, sources of capital and growth plans it may make sense to incorporate at some point in your journey.
You should invest a little time to establish your roadmap (objectives and how/when you see yourself arriving at various points on the map), and educate yourself (Steven Cohen & George Dubé's book "Legal, Tax and Accounting Strategies for the Canadian Real Estate Investor" is a good primer). You should also invest a few dollars and find yourself an accountant and attorney who know business and real estate and can counsel you with respect to how to organise your holdings and when it may make sense to not hold particular {real estate} investments in your own name.
If you search here on BP there have been several, more detailed, discussion on incorporating here in Canada.
As a final note, a fair amount of what you may read here about incorporating in the U.S.A. - particularly around LLCs - is not applicable to you in this country.