Renting or buying business premises: what to choose?

When a professional decides to open his practice, and he certainly does not intend to work at home, he must decide on the local of his future business. And there, he is faced with two choices: buy his premises? Or rent it? Either of the two options is good. The entrepreneur is free to choose the one that suits him the most.

Difference between business premises and commercial premises

We tend to confuse them, but each is distant from the other. the business premises is the office or office space intended for the exercise of a liberal profession (e.g. lawyer, doctor, notary, etc. In the case of office rental for a liberal profession, there are no strict regulations. On the other hand, a commercial lease is strictly regulated by the commercial code.

Renting does not increase the cash flow

To buy a place, you have to make a very important investment. Funds are usually made up of equity and Bank loans. However, in the majority of cases of new professionals, they do not have sufficient funds, nor the necessary guarantees to buy their premises from the start. Renting is a good solution, especially since the rental charges do not weaken the cash flow, unlike the purchase of fixed assets. In addition, the company does not generate enough turnover in its first two years, and weakening its investment capacity through loan interest is not a good idea.

Renting an office will allow deduct rental charges of the accounting result of the company, thus reducing the tax to be paid to the State, and thus lightening the taxation of the firm.

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Procurement : a significant heritage

Land and buildings are a very valuable item on a company’s balance sheet. This gives it value in the eyes of potential investors. So, although it generates significant outflows of money, especially if you don’t have enough funds and you have recourse to the bank, the purchase of the premises enhances the business in the eyes of third parties. The premises can also be purchased by the entrepreneur on a personal basis. In this case, he rents it to his company and deducts his rental charge from the result of the company, but in reality, this money comes out of the entrepreneur’s pocket to return there, while realizing a tax reduction ! A gain for both the company and the head of the company.

Therefore, if the professional has the funds to make such an investment, the best solution would be to make a combination between purchase and rental: the purchase is made by himself, therefore the cash flow and the investment capacity of the business are not impaired, which is equivalent to a normal rental, except that the money does not leave for a third party. He stays with the professional.

Read also: 5 criteria for buying commercial premises

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