As a business owner, you are in an interesting position when you hold property. You have two real choices. The first is to sell the property to bring in profits that you can reinvest. If you want to buy a new property, this could be a great way to get the capital to do so without taking out a loan.
On the other hand, you may also want to consider leasing out the property. Leasing doesn’t give you as much money upfront, but over time, you may earn more.
Thinking about these options, one might stick out as better than the other, but before you decide, consider the legal impacts of each.
You could have tax implications from selling property
Selling property as a business owner may lead to extra taxes for you personally or your business as an entity. If your business has losses, it may be possible to reduce the taxes you pay. If not, you could see a higher tax rate this year. Think about how the extra money could change your tax bracket before deciding to sell. Also, remember that sole proprietors will have that income on their personal taxes and need to check with a tax professional to see the impact.
Leasing takes extra effort
If you decide to lease a property, there are some extra steps you need to take. You need to talk to an attorney and set up a leasing agreement that you’ll hold tenants to. If you need to negotiate with potential tenants, you’ll have to go over their suggested changes to the contract and think about how you want to address them.
During the length of the lease, you may have obligations to meet, too, which can complicate things if you’re already busy.
Your property can be sold or leased, but which should you choose?
It’s not always easy to know the right answer to this question, since everyone’s businesses are different. You’ll want to look at your business’s finances, consider if you need capital and other factors before you decide if you want to lease out or sell your commercial property.
