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Should I create a corporation before my first investment property?

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InkStead | 25 Nov 2015, 02:35 PM Agree 0
I was advised that I should create a corporation to protect myself before I close on my first investment property. But this opens up a lot of questions for me.

1) Does it apply to JV partnership investment properties as well?
2) I'm in Canada. I know it costs $200-$250 to register and $22 for a NUANs name search. But what are the other fees total per year that I'm looking at spending per company? I "heard" that the average was around $3000/year to maintain/keep a corporation . But I don't want to speculate, I'd like to know for sure.
3) I know that in time as my portfolio grows, I should be creating corporations for different purposes (holding, property management etc). When do I know it's the right time to make those? Or should I hit the ground running and get both set up before my first income property (which will be a high initial cost).
4) Does is matter if my corporation is Co., Corp., Inc., LLD etc?
5) I believe a corporation has to have an office address, does that mean I need to factor in the cost of an office rental just for an address? What kind of advice can you give me on this front?

Thanks again!
  • Travis Royle | 10 Dec 2015, 11:59 PM Agree 0
    You should speak to your accountant. If you don't have one, get one. I have multiple properties and I haven't started a holding company yet as the tax savings are better owning them personally. Each person is different and should seek advice from a professional in that field.

    Good luck!

    Travis Royle
    Sales representative
    Century 21 Lanthorn
  • Gayland Panko | 13 Dec 2015, 10:11 PM Agree 0
    There are a lot of variables that might affect your decision. i.e. size of purchase, future earnings, personal income, tax bracket, future plans, etc.

    1. JV's will be dependent on these same variables. You can also JV within a Limited Partnership or within a corporation with a Unanimous Shareholders Agreement.
    2. The costs will depend on your accountants and your lawyers. $3000 could be considered high for most people, but with better accountants it may easily cost $3000 or more. Your lawyer will file your annual return of minutes, shouldn't cost too much.
    3. This is hard to answer, if your first property is a $2M apartment building, go ahead and incorporate. If it's a $250,000 duplex, I don't think it's worth it.
    4. Ltd, Inc, etc. you have all sorts of options, talk to your lawyer. You can usually get a quick numbered shelf corporation (lawyers have lots) and change the name to whatever you want later.
    5. My corporations all use my attorneys office address.

    A good accountant and lawyer (who will connect with each other) are essential if this is the route you are going to go. If you are just starting out and can't pay the costs of these, maybe you should wait until you can afford to incorporate properly.
    I'm sorry, but unless you are dealing with millions, the answer is not easy. I believe most investors buy property personally until the wheel starts really rolling. This could cost you more in the long run, or less; we don't know the future.
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