New business owners have a lot of decisions to make. One of the decisions that they
need to make early on is whether to buy or lease office space.
Buying space for an office complex puts the new business owner in another business
as well- real estate. If the value of the property does very well then the New business owner could sell the property for a profit later on.
However, on the other hand, New business owners may invest more on their property
then they can actually afford to. This will result in a drain on the financial resources
of the new company. Many small businesses operating one a small and tight budget
prefer to lease their space instead of buying office space.
Another factor that new business owners need to consider when buying office property
is the tax that they need to pay on it. New business owners can write off repairs
immediately, but improvements to commercial real estate have to be deducted over
39 years. Depreciation on commercial buildings also is taken over 39 years. On the
other hand, New business owners who rent out office space can deduct the full amount
that they pay on rent as a tax deduction.
Some attorneys may recommend placing a commercial property inside an entity such
as a limited liability company (LLC). By doing this, New business owners can also
lease out portions of their commercial property to other businesses.
A lot new business owners operating on a tight budget prefer to lease properties
for office space. This is because the new business owners can avoid making large
upfront investment required with a purchase.
Leasing is also attractive option for new business owners who are not really sure
about how much space they will require and do not want the responsibility of owning
a commercial property.
Owning a commercial property is not so much for new business owners as it is for
established businesses who want to be in one location for several years and who
have the financial resources to take on a significant real estate investment. Of
course, a final decision between leasing and owning a commercial property depends
on the plans of the new business owner.