Business Structure Help. Alberta, Canada

[Steve Schneider]

Hi there BP community,

This question is for my fellow Canadian Investors. I was just curious how other people have went about structuring their Real Estate Investing companies. My fiance and I meet with our accountant next week to discuss some options but I was hoping to get some advice on what has worked for you guys. Are people just starting up a proprietorship or are they going straight to a corporation? Is this something I even need to think about at this time or should I wait until we have a few properties under our belt. Our plan is to buy 3 properties this year and grow our portfolio larger each year. All advice is appreciated and thanks in advance.

[Roy N.]

@Steve Schneider

Pick-up a copy of Steven Cohen and George Dube's "Legal, Tax and Accounting Strategies for the Canadian Real Estate Investor" so you will be better equipped to ask the right questions of your accountant and attorney.

There is no single correct answer.  Depending on your personal marginal tax brackets, your sources of seed capital and your near term objectives it may make more sense to start by acquiring properties in your own name and roll them into a holding company at a later time.

Rental income is considered passive income, as such, a real estate company does not qualify for the reduced CCPC tax rate for small business, but is taxed at the highest corporate rate.  Unless you are personally in a high tax bracket, it may make more sense from a tax perspective to hold the properties directly until you reach such a certain size of operation and then roll them into a corporation (there may, or may not, be a taxes due at this point in time).