Things to Consider When Buying Real Estate with a Business Partner in Alberta
Having a business partner can be extremely beneficial. You and your business partner likely have different skills, experience and interests and you both bring something unique to your business partnership. But having a partner can also make a real estate deal more complicated. Our Edmonton business lawyers may be able to help ensure that you have all the advice you need when buying real estate with a business partner in Alberta.
Whose Name Will Appear on Title?
Title to real property can be registered in the name of one or more real persons or in the name of a corporation. If you and your business partner choose to register title in your names, you must decide whether to register the property as tenants-in-common or as joint tenants. Joint tenants have a right of survivorship, which means that if one joint tenant dies, their interest in the property automatically passes to the other joint owners. If you are purchasing real property for business purposes, joint tenancy is likely only a reasonable option if your business partner is also a relative.
Some business partners choose to register title to real property in the name of a corporation. Neither ownership model is better than the other, depending on the situation. Whether or not you should purchase real property through a corporation will depend on many factors, including:
- - Your financing needs (it can be difficult for a corporation to obtain a mortgage in some situations)
- - Whether the corporation would be used only for holding the real property
- - Whether you and your business partner have other business interests with potential creditors and want to isolate the real property from those creditors
- - Whether you intend to use existing corporate assets to purchase the real property.
Rental income, business income and capital gains are all taxed differently, so the way in which you and your business partner intend to use and make money from your real estate will affect your tax liability. Whether the property is owned personally or by a corporation may also affect the amount of tax you pay. Because of this interplay between ownership structure and tax considerations, it is important to consult a tax professional before you purchase real estate with a business partner.
How Decisions Will Be Made
A written agreement setting out how you and your business partner intend to deal with your real property may be the most important thing to consider before purchasing the property. An agreement may include:
- - How you will make decisions such as whether to renovate the property and whether to accept a particular tenant
- - Whether a particular partner will have final decision-making ability in particular situations
- - How expenses will be paid and how and when profits will be distributed to the partners
- - How and when partners will receive reports and who will be in charge of providing them
- - A mechanism for resolving disputes
- - A mechanism for buying out a partner in the event that a partner wants to sell, dies, or is unable to meet their responsibilities with respect to the partnership.
Contact our Edmonton Business Lawyers Today For a Consultation
You want an agreement that reflects your needs and your relationship with your business partner. We may be able to help! Contact our Edmonton business lawyers today to discuss more things to consider when buying real estate with a business partner in Alberta.
*Please be advised, the information in this article is not legal advice. If you require legal advice about real estate in Alberta, or other matters, please consult with a lawyer.