The Benefits of Incorporating: To incorporate or invest personally?



By: Darren Richards, LLB and George E. Dube, CPA, CA

“Should I incorporate my real estate investing business?”

This is probably the number one question we receive from investors and it is one without an easy answer.

The decision whether to incorporate requires an assessment of a whole range of factors, such as the nature of your assets and other business endeavours, including those described below.

If you currently invest in real estate personally, you should seriously consider using a corporate entity somewhere in that mix. For the sake of simplicity, we would like to boil it down to the following reasons:

  1. Overall flexibility
  2. Legal benefits
  3. Tax advantages
  4. Mortgage qualifying
  5. Organizational/professional considerations


Multiple Owners  

If more than three or four owners are involved, it might make more sense to maintain ownership, management and governance of the business via the well-traveled legal structure of a corporation. You can have a Unanimous Shareholder Agreement (USA) drafted to deal with contingencies such as death or default, or other unhappy circumstance of co-owners. Holding title together as individuals could result in complex, costly, and unwanted legal headaches should these types of events occur. When title is held personally, it is more difficult to add or remove an owner, amend relative ownership positions, and transfer interests. Title itself can also be exposed to writs, liens and other attachments by creditors should any one of the individuals get into financial trouble.

Structure Options

Using a corporate structure in combination with joint ventures, family trusts, trust agreements, partnerships, and limited partnerships, as examples, can create, in some cases, opportunities from a tax, legal and/or financing perspective.

Remuneration Options: More choices for how to get paid

With different owners available, including family members, a corporation allows for the possibility of paying different types of income. Extracting cash from a company may allow for the payment of, for example:

  • Bonuses
  • Wages
  • Dividends
  • Temporary loans
  • Repayment of loans
  • Management fees

Furthermore, there can be more flexibility as to when these amounts are paid as compared to more strict requirements under personal ownership.

Purchase and Exit Options 

Purchase and sale options may also be more numerous if a corporation holds your real estate portfolio. For example, instead of somehow selling a five percent interest to someone and then having to transfer multiple titles, deal with lenders (to address due on sale clauses), or creating proper joint venture agreements, a simple sale of shares in the corporation would be an option. Most lenders consider a sale of a controlling interest or some other percentage threshold as a “disposition” that would trigger the due on sale clause of the loan so you need to take care with this.

That said, corporate share ownership allows some flexibility in estate planning or even financial planning. Using corporate entities for many larger projects, and as parties to more complex investments vehicles like limited partnerships, would also be necessary.

Further, “divorcing” from a business “partner” when the owners are shareholders in a corporation is sometimes much easier. A unanimous shareholder agreement will likely give detailed guidance on how that must be done, and allow certain processes to be implemented to force the divorce on reasonable terms.


Several potential legal benefits exist when using a corporation in certain situations.


If some owners want a degree of anonymity maintained with respect to the public or tenants then a corporation may help. Ownership of voting shares is a matter of public record in most jurisdictions of Canada but it takes an effort to find that information. In addition, non-voting shareholders generally do not appear on any public search results of closely held corporations.

Liability to Third Parties

With respect to third parties (like trades, tenants, and service providers), the benefit of having liability protection is certainly a positive consideration as well. A corporation would be liable in a legal dispute with a trade, for example, but the individual owners of that company would likely not be impacted by any remedy or judgement that may flow from that.


Insurance doesn’t always protect you, so the benefits of the legal protection of a corporation, while not perfect either, does provide an additional layer of protection for personal and other assets.


First, to be clear, owning properties through a corporate structure is not always more beneficial. However, we find that in the majority of cases, investors will find corporate ownership provides tax savings for the family when measured over a reasonable period. A long-term horizon can result in tax savings for the families of the investors and superior estate and succession planning opportunities.

Further, short-term savings are possible for typical rental situations where for example:

  • Spouses are in higher income tax brackets but approaching retirement or semi-retirement
  • People are helping kids/grandkids with post-secondary education costs
  • One spouse is in a lower tax bracket

Short-term savings also typically result where, for example, properties are:

  • Being flipped
  • Converted to condo/strata, then sold
  • Developed and sold
  • Set up as rent-to-owns


There was a time not so long ago that banks were very cautious about corporate lending (from “holding corporation” requirements to asset liability tests) but we have seen a change in that regard recently. Indeed, for some projects where multiple properties or multiple parties are involved, lenders prefer a corporate structure.

From a legal standpoint, banks see the underlying security of the real estate asset, the credit worthiness of the owners (oftentimes requiring personal guarantees), and traditional simplicity of corporate ownership as distinct advantages. Indeed, they are often more secure than they would be the case with individual loans.

However, various restrictions can still apply and some institutions unquestionably avoid corporations.


Some see a distinct benefit in presenting a “professional” face to the public with respect to trades, tenants, and others. Whether corporations are seen as more professional is a topic of debate – but many of our clients most assuredly consider it an asset for marketing and reputation.

Other benefits are also possible through corporations. Some disadvantages exist too, such as cost to implement and maintain, plus some additional complexity. This is one of those stereotypical situations where we must, at the end of the day, simply advise you to contact your lawyer, accountant, and mortgage broker to get proper and detailed advice about your particular situation.

Darren Richards is a partner with Richards Hunter Toogood. He focuses on both residential and commercial Real Estate and Corporate/Commercial Law serving both small and medium sized owner-managed businesses in the Edmonton and surrounding region. Richards also acts for major banking institutions and other lenders in relation to their commercial loan facilities. Reach him at: or             

George E. Dube, CPA, CA is a veteran real estate investor and accountant. He has spoken, written various articles, and co-authored two books on real estate accounting. Reach George at: or @georgeEdube.


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