What is a Holding Company?
- Thread starter Ken15
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A holding company is a corporation that, by CRA`s definition, does not carry out active business activities. In order to have an active business the company needs to have at least 4, I think, employees. Unless you have four or more employees, holding real estate in a corporation is not considered being active by CRA.
There are numerous threads here on the pros and cons of incorporating. Rather than restating what has already been said, do a search.
There are numerous threads here on the pros and cons of incorporating. Rather than restating what has already been said, do a search.
What are the liabilities associated with owning residential investment property and being the landlord if it is not through a corporation.
Thanks
QUOTE (Dan_Eisenhauer @ Apr 22 2009, 09:26 AM) A holding company is a corporation that, by CRA`s definition, does not carry out active business activities. In order to have an active business the company needs to have at least 4, I think, employees. Unless you have four or more employees, holding real estate in a corporation is not considered being active by CRA.
There are numerous threads here on the pros and cons of incorporating. Rather than restating what has already been said, do a search.
Thanks
QUOTE (Dan_Eisenhauer @ Apr 22 2009, 09:26 AM) A holding company is a corporation that, by CRA`s definition, does not carry out active business activities. In order to have an active business the company needs to have at least 4, I think, employees. Unless you have four or more employees, holding real estate in a corporation is not considered being active by CRA.
There are numerous threads here on the pros and cons of incorporating. Rather than restating what has already been said, do a search.
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QUOTE (rlfyten @ Apr 22 2009, 10:01 AM) What are the liabilities associated with owning residential investment property and being the landlord if it is not through a corporation.
Thanks
There is no difference. If you have operated in a questionable manner, any action will strip away the corporate veil and operate against the directors and possibly the owners. Many investors, even those with larger portfolios, own all their real estate in personal names. Certainly recently, any of the lenders I have dealt with will only fund props owned in a personal name.
Harry
Thanks
There is no difference. If you have operated in a questionable manner, any action will strip away the corporate veil and operate against the directors and possibly the owners. Many investors, even those with larger portfolios, own all their real estate in personal names. Certainly recently, any of the lenders I have dealt with will only fund props owned in a personal name.
Harry
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This topic has been discussed numerous times, but may be in the members` section.It is believed by many that owning in a corporation makes the owner of a property free of liability. That is true to SOME degree. However, lenders will ask for personal guarantees. Whoosh! Away goes that protection, and the owner is liable for the mortgage.
Someone falls and gets injured on your property. The injured party will sue the owners, officers, and directors of the corporation for negligence. Whoosh! Away goes that protection, unless you have great insurance.
What incorporating does do is offer some protection if a company gets into financial difficulty. Companies can add an element of protection, but not a guaranteed protection.
Companies are more expensive to operate... annual reporting fees, audits, etc. Unless it is an active company, you do not save taxes by using a company. It is tougher to find lenders willing to deal with private companies.
My personal opinion is that unless you are buying a larger project with multiple partners, or unless you have a large estate that needs planning, there is no reason to incorporate.
Someone falls and gets injured on your property. The injured party will sue the owners, officers, and directors of the corporation for negligence. Whoosh! Away goes that protection, unless you have great insurance.
What incorporating does do is offer some protection if a company gets into financial difficulty. Companies can add an element of protection, but not a guaranteed protection.
Companies are more expensive to operate... annual reporting fees, audits, etc. Unless it is an active company, you do not save taxes by using a company. It is tougher to find lenders willing to deal with private companies.
My personal opinion is that unless you are buying a larger project with multiple partners, or unless you have a large estate that needs planning, there is no reason to incorporate.
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A little clarification:
My question is the difference between a "regular corporation" and a "holding corporation" if any????
I`m not asking whether it`s better to incorporate or not. There are many posts regarding this topic!
I`m interested in information specifically on a "holding company" as compared to a "regular company". Any benifits or tax savings compared to regular corporations?
My question is the difference between a "regular corporation" and a "holding corporation" if any????
I`m not asking whether it`s better to incorporate or not. There are many posts regarding this topic!
I`m interested in information specifically on a "holding company" as compared to a "regular company". Any benifits or tax savings compared to regular corporations?
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There is no difference.
However, as I said above, CRA taxes an inactive company at a higher rate than an active company. That tax rate is about the same rate as the highest personal marginal tax rate... thus no tax savings available. Unless you have 4 or more employees, a real estate company is considered inactive by CRA.
One of the above posts asked about liabilities within a company. My previous answer was in response to that question.
However, as I said above, CRA taxes an inactive company at a higher rate than an active company. That tax rate is about the same rate as the highest personal marginal tax rate... thus no tax savings available. Unless you have 4 or more employees, a real estate company is considered inactive by CRA.
One of the above posts asked about liabilities within a company. My previous answer was in response to that question.
