Should I Incorporate my Rental Property in Canada?

Incorporating your rental property in Canada can be a smart financial move for many landlords. However, it’s important to consider the pros and cons before making this decision. Here are some factors to keep in mind when deciding whether to incorporate your rental property:

Pros of Incorporating a Rental Property:

  1. Limited Liability Protection By incorporating your rental property, you can protect your personal assets from any liabilities that may arise from the property. This means that if there is a lawsuit or other legal action against your rental property, only the assets held by the corporation will be at risk, not your personal assets.
  2. Tax Benefits Incorporating your rental property can provide tax advantages, such as access to the small business deduction and the ability to deduct expenses related to the corporation. Additionally, any income earned by the corporation can be taxed at a lower rate than personal income tax rates.
  3. Estate Planning Incorporating your rental property can also make estate planning easier by providing a structure for transferring ownership and managing the property after your passing.

Cons of Incorporating a Rental Property:

  1. Increased Complexity Incorporating your rental property will add a layer of complexity to your business operations. You will need to comply with additional regulations, maintain corporate records, and file separate tax returns.
  2. Cost Incorporating your rental property can be expensive, with fees for registering the corporation, ongoing legal and accounting costs, and other expenses associated with maintaining the corporation.
  3. Financing Difficulties Incorporating your rental property can make it more difficult to obtain financing, as lenders may view the corporation as a separate entity and require a personal guarantee from the owner.

Overall, incorporating your rental property in Canada can be a smart financial move, but it’s important to weigh the benefits and drawbacks before making a decision. At Falcon Law PC, our experienced real estate lawyers can help guide you through the process of incorporating your rental property and provide advice on the best course of action for your specific situation. Contact us at 1-877-892-7778 or send an email to info@falconlawyers.ca to schedule a consultation.

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