Can I Rent My Own Property to My Business?
Can I Rent My Own Property to My Business?
Yes, you can rent your personal property, such as an office or a warehouse, to your business. This is a common strategy for tax planning and asset protection.
Leasing or renting property to your business can be a smart strategy but only if you do it right. The IRS and CRA pay special attention to this setup, especially if your business is a partnership, S-corp, C-corp, or multi-member LLC. That’s because you’re essentially doing business with yourself, opening the door to potential tax manipulation.
However, if you’re operating as a sole proprietorship or single-member LLC treated as a sole proprietorship, the IRS and CRA don’t even recognize the lease. To them, you and the business are the same entity, so rent paid to yourself doesn’t exist in their eyes.
How Can I Rent My Own Property to My Business?
If you’re in the group where the IRS does care, here’s how to do it properly:
Step one: Figure out the fair market rent
You can’t just throw out a number that sounds good. Do your homework—check what similar spaces in your area rent for and document it. The IRS has valuation experts who can swoop in and challenge your setup if it looks fishy.
If they think you’re charging your business too much, they might reclassify the extra as salary or dividends, which could result in additional taxes.
Step two: Check local rules
Some cities and states in the US and Canada require special licenses or zoning approvals for commercial landlords. If you’re renting space to your own business, ensure everything is legal and squared away. Don’t overlook permits or business licenses as well.
Step three: Create a real lease agreement
Even if you’re both the landlord and the tenant, treat it like a third-party deal. That means writing up a proper lease that covers rent amount, utilities, maintenance responsibilities, shared spaces, lease duration, and renewal terms. If the IRS or CRA ever reviews your setup, having a formal agreement helps you look legit and stay out of hot water.
Benefits of Renting Your Own Property
Renting your property to your business isn’t just a clever move—it can offer some real, practical benefits when done correctly.
First, let’s talk about income. If you have space, you’re not fully using a second office, warehouse, or even part of a commercial property—it doesn’t have to sit idle. Renting it to your business turns it into an income-generating asset. The rent you collect becomes personal or corporate income, depending on your business structure.
Next up is tax savings. Your business can deduct rent payments as a legitimate expense, which lowers its taxable income. And that’s not all—property-related expenses like utilities, insurance, maintenance, and property taxes can also be deducted. Just make sure the rent you charge is at fair market value. The IRS or CRA may raise an eyebrow if it’s unusually high or suspiciously low.
There’s also a protective benefit. By renting the property instead of owning it outright by the business, you create a layer of separation between personal and business assets. That can be crucial in high-risk industries like construction. If your business ever faces legal trouble or financial strain, your personally owned property is less exposed.
Finally, if your business is a corporation, building business credit is another plus. Making consistent, on-time rent payments from the business to you creates a solid financial track record. That can help when you apply for loans or other financing.
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