If you have further questions afterwards, I’d recommend talking to an accountant if you’re questions are mainly focused on tax implications of a corporation or a lawyer if your questions are mainly about liability and legal consequences (or both if your questions run the gamut).

Good luck with your new venture if you decide to move forward!

I have a rental and considered incorporating as well, but the passive income rule changed my mind.

You can use CCA with a personal rental property, no problems with that. I’ve used CCA against the property itself (buildings only of course), and the furniture inside, as I rent it furnished.

I’m always on the lookout for new tax saving strategies. I’ve got a lot of unused RRSP room, so that will help me for a few years, but after that I’m scared to think of what my taxes will be.

I agree that just putting a clause in your lease saying “I’m not liable” isn’t enough (although software makers always try that with their click-through licenses).

The small business rate is around 20% (ont + fed, there have just been some changes to this rate, so I am not completely up on it).

The small business rate is based on net profits of less than $500,000 and that usually applies for most businesses.

However, when the corporation has passive income (investment or rental) the rate is higher (like 40%, again I would have to check).

The advantage of the incorporating comes into play if you take the CCA, or if you are planning to redevelop a property. It can also come into play if you have multiple properties).

As far as liability is concerned, most liability can be coverage (corporately or personally) through your insurance. The only issue becomes if a judgement against you is greater than your liability insurance provides.

As for a tenant slipping and falling, if it is a single family home and the tennant is reponsibile for ice and snow removal, you could not be held liable but this should be spelled out in the lease.

In a multi unit residence, there are common areas where you can be held more liable for certain mishaps.

As for piercing the corporate shield, if a director is willfully negligent, they can be held liable (i.e. corporate minutes show that a recommendation for repairing stairs, and the directors vote against it, tennant slips down stairs, etc…)

Q

Liability of this sort should be covered in your insurance, unless you do something very negligent. I also agree with Mike.

As for legal actions, its a free country, anyone can sue anyone (but a judge might throw the case out if it is frivolous lol).

Apart from tax rates on corporations, in the US transferring property to a corporation (versus a limited liability company) is generally a bad idea because the property cannot be transferred back to the corporate owner, such as might be necessary for estate planning or other reasons, without incurring tax. An LLC will not provide any tax advantages for tax on rental income but will allow a distribution or transfer of the property to the owner(s) without tax consequence. Is this an issue there?

Here’s another question: if a tenant living in your premises slips and injures themselves, can they (legally) file a suit against the owner?

My concern is in terms of what kind of liability am I exposing myself to here by not incorporating? And also, my lease agreement stipulates that I am not responsible for any form of physical injury suffered within the premises (which my tenants signed off on) – is this enough to protect me?

Q & MDJ: Could you provide more info about this passive income being taxed at a higher corporate rate for rental income? What’s the advantage of putting a rental property into a corporation if that’s the case?

CTR: So, I guess if someone were to sue you, they’d want to try to prove that you were doing something illegal… Interesting.