If you're launching or expanding your brick-and-mortar business, you may be wondering if buying or leasing a space is right for you. Both offer distinct advantages and liabilities, which will determine which path is best for your circumstances. There is no one-size-fits-all solution, so it is wise to consider all sides of the issue before you make a move.
Many business owners choose leasing when searching for a place to run their operation. If you are a new business, then it is likely that you will not have available credit in the company to make a mortgage possible. By signing a lease, you may be able to keep your expenses more predictable, especially in the first several years of a doing business. A lease can help protect you from unexpected maintenance costs, and your rent can be deducted as a business expense come tax time. Leasing may also provide you with flexibility if your business may want to move in the near future. It is also possible that you simply can't find the right property to purchase, but need to launch the business anyway.
Buying property also provides its own set of advantages. Buying is often ideal for long-term business plans, especially if the location is ideal for your particular business plan. Similarly, buying a piece of property can help you save money in the long run, and possibly offer you the opportunity to lease some or all of the property. It may be much easier to make significant renovations to a property you own, if that proves necessary to your business plan. Also, depreciation of the property and interest paid on a mortgage may be tax-deductible.
Each situation is different, and must be evaluated based on your needs and resources. To ensure that you are considering all aspects of a real estate deal, and to avoid unsavory hidden surprises, it is always wise to consult with an experienced commercial real estate attorney. With proper legal guidance, you can protect your business and your rights.
Source: findlaw, "Factors to Consider: Lease or Purchase of a Facility," accessed March 03, 2017