Deciding to lease or purchase company space
7/23/2016 | Real Estate Blog
Pennsylvania entrepreneurs planning on starting a new business or have a lot to think about when it comes to the facilities they operate from. The question of whether to lease or purchase space involves many important considerations. Small business owners should assess their cash flows before making a final decision.
Those who purchase facilities could end up saving money in the long run as they avoid the premiums their landlords build into lease agreements and benefit from tax deductions. They may also find it easier to establish a local presence because they won’t have to relocate when their leases are up. For businesses that want to modify their premises or dictate their own hours of operation, purchasing can afford greater decision-making freedom.
Leasing has its own unique benefits, not the least of which are that businesses often spend less to buy in and get to deduct their rental payments. Startups without sufficient credit might find it easier to lease than it is to take out a mortgage. Companies also get to avoid some upkeep costs and the negative effects of property depreciation. Because leasing and purchasing both allow companies to utilize business assets, owners are advised to carefully consider the pros and cons of each strategy in light of the expenses they’d need to pay after taxes.
Growing a startup into a sustainable business requires ample planning. Companies that want to succeed must be able to think ahead and consider what their current assets and business models will look like months or years down the line. Those thinking about purchasing or leasing commercial real estate also have to account for how the choice might impact their cash flow and profitability. Regardless of the choice, an attorney can be of assistance in reviewing the pertinent documentation before it is signed.