Owning your Place of Business

You have finally arrived at the point where you can buy your own office building, warehouse or factory. You can afford the payments and you are tired of paying rent to someone else. You find a building and are ready to buy. Before you jump consider whether the company should own the building or if you should own it personally.

If you own it personally and rent it to the corporation there can be a number of significant benefits. If the company is doing well you can use the "rent" to take some money out of the corporation.  The IRS has rules about unreasonable rent but there is no rule saying you cannot be on the high side of reasonable. Even if you only breakeven on the cost of owning vs. cost of renting you will be able to depreciate the building and create a tax shelter.

If you are buying a building you may wish to buy a building big enough to grow into. If you do buy a building bigger than you currently need plan to rent the extra space until you need it. I know a company that rented extra space in their building. The rent was so profitable that when the time came to "grow" into the space they moved and rented the rest of the building. Remember when designing the space design for the most universal utility and not just for your specific use so that when if you choose to rent or sell the building you maximize your return.

Owning the building personally may also help you protect the asset should the company lose a large lawsuit or other catastrophic financial disaster. 

You can also own major equipment and rent it back. In our home building business we had a sales trailer which we bought with funds from our IRA. The company rented the trailer so was able to expense the cost of the rent. The income went into the IRA tax deferred.  After several years we no longer used the trailer so we sold it at a profit. The profit went back into the IRA tax deferred as well.