Corporate Law: Decision tto buy, lease depends on business

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You may be considering whether to buy or lease a parcel of real estate for your business. Perhaps you are now leasing, and wonder whether it makes sense to buy. If so, do you build or purchase improved property? It is an important financial decision and there are a number of factors that you may wish to assess before making the final decision. Some of those factors are addressed below.|ret||ret||tab|

Maturity of your business. If your company is a new one, perhaps without a track record, it is surely safer to lease property. If, on the other hand, your business is established and you are no longer just trying to stay in business, a piece of corporate real estate may make sense. |ret||ret||tab|

Type of business. Some businesses require their own property. It is especially difficult to lease today if you are handling environmentally sensitive materials or working in an industry that is heavily industrial. Some businesses find it more effective to own their own property. |ret||ret||tab|

Cash flow/cost. For some businesses, it is cheaper to lease space than to own it. If you are leasing warehouse space at $4 per square foot and the cost of buying your own property and building a structure is going to cost you more money on an annual basis, you might want to renew your lease. |ret||ret||tab|

Size requirements. Some companies are growing quickly, while others use the same square footage year after year. If you purchase property, try to look ahead. Will the property be large enough in two years? How about in five years? It is not always easy to sell commercial property, especially if the improvements and infill are designed for a particular type of business. |ret||ret||tab|

Number of owners. Are you the sole owner? If so, it is certainly easier to get a consensus. If there are more than a few owners, it is always difficult to agree on a site and design for the improvements. Some owners may desire more, or fewer, amenities than others.|ret||ret||tab|

Market trends. Determine whether rents are increasing for the type of property you need. Will an investment in real estate appreciate, or could you do better investing the money in your business?|ret||ret||tab|

Focus. What is the focus of your business? Purchasing and constructing business property will take a significant time commitment on your part. Will dealing with architects and contractors detract from your business efforts?|ret||ret||tab|

Possible sale of the company. When you sell your business, owning the real estate may be a benefit or a detriment to potential purchasers. |ret||ret||tab|

Tax ramifications. As with any important decision, you should consult with your tax advisers to see what impact the decision to purchase may have on your tax situation. |ret||ret||tab|

|bold_on|(Stephen F. Aton is a Springfield attorney practicing in the areas of corporate law and taxation, and estate planning.) |ret||ret||tab|

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