For many entrepreneurs, an office space is not a necessity, especially if they work in the service sector and prefer to run their business from home.
A period of low income is quite common during the start-up phase, hence the need to take steps to supplement it.
Entrepreneurs starting their business from home may find that renting out a portion of their primary residence to the business is an attractive option, which we will discuss in detail in this article.
In what ways can you make finding a location for your business easier?
In order to lease office space to your business, your business needs a place that can be turned into an office and used for your business.
An office lease agreement that specifies the property to be leased, the amount of square footage to be occupied by your business, the monthly rental fee, and the term of the lease is necessary if you want to lease office space.
The amount of space occupied by a business must be reported to the corporate tax department at the business level. For calculation purposes, we will start with this amount of land.
The advantages of renting an office for your business
The first advantage of renting an office for your business is that you can pay the rent whenever you want, even if you don’t have the money right away or don’t feel like it. This allows you to turn the profit into a tax-deductible expense that costs you nothing.
It’s also worth noting that there are tax advantages to this strategy, which we’ll discuss in detail below.
Renting an office for your business has tax implications
Renting an office has financial implications for both your business and the entrepreneur.
The consequences for the business
The rent paid by the company can be deducted as a business expense because it is deductible.
- Reduction of the company’s profits and/or the partners’ profit shares (for partnerships),
- Or reduce taxable income, resulting in a reduction of the rent payment.
To determine if renting an office is a good investment, it is essential to evaluate the tax savings in relation to the increased costs incurred.
Implications for an entrepreneur
For the entrepreneur, leasing an office to his or her business is a way to make money from real estate. It creates a new source of income, which comes with the following benefits.
It has no impact on the Business Start-Up and Recovery Program because it is real estate income.
To learn more about our available office space, please contact the Color Business Center.