Corporation vs. Trust??

[meonhomes]

Hi, looking for some insights on the best structure for an investment company. I want a relatively "simple" (if such a thing exists) yet secure way to purchase properties (i.e. for buying and holding, flipping etc.), either on my own or with JV partners. For tax reasons, accountant suggested trust; for simply protecting my personal assets, lawyer recommended a corp... I have also heard of 3-tier corp structures (with #'d co., hold co, and management co.). Seems very complicated!!



Obviously, for many reasons, I don't want to have a larger structure than I need, but also want to ensure that personal assets are protected etc. Any thoughts would be appreciated!!

 

[Thomas Beyer]

[quote user=meonhomes]personal assets are protected etc.


There is liability .. and there is tax.



If you buy real estate, usually you get a mortgage. In most Canadian provinces, expect Alberta, you are personally liable for this mortgage. If you buy an asset in a trust or corporation, you usually have to sign a personal guarantee as well.



Trusts expire in 20 years to my knowledge in Canada, so corporations are better for longevity !



Corporations allow multiple share classes for wife, kids, grannie .. if you wish to dividend money out later. It also allows you to separate control from beneficial ownership, for example for JVs.



An asset held in a corporation can shield you from lawsuits over and above the equity in the corporation, such as a tenant falling off the balcony and breaking his neck. But, s/he will sue you and the corporation anyway.



There is also cost of initial and annual filing/tax returns. Only for larger asset bases does it make sense to incorporate, say 3+ houses or a small multi-family or commercial asset. In Alberta you must have a corporation for a commercial mortgage.



In this link here I show pro's and con's of incorporating.



To answer more specifically, give us a SPECIFIC scenario as generic answers "it depends" may not be useful.

 

[meonhomes]

Helpful... thank you!