Quick Insight
Sometimes companies don’t directly buy their building, but instead rent it from the company’s owners. This can reduce the cash flow burden on the company while still allowing owners to control the building. The owners may form an LLC with outside investors to own the building. This allows outside investors to provide some equity to fund the purchase of the building without diluting the ownership of the company itself.
Sometimes companies don’t directly buy their building but instead rent it from the company's owners. This is more common with closely-held companies.
This can reduce the cash flow burden on the company while still allowing owners to control the building. The owners, rather than the company, make the down payment on the building. It may also have personal financial planning benefits for the owners.
The owners may form an LLC with outside investors to own the building. This allows outside investors to provide some equity to fund the purchase of the building without diluting the ownership of the company itself. These outside investors receive rental income but not a share of the company’s total income.
This is something you would need to talk about with your CPA, tax accountant, and financial planner if you were considering it.
I wish your company strong cash flow. I wish you well.
- Rob Stephens
Further Insight
- Lease Back Arrangements With Your Own Business on Stimmel Law
CFO Perspective Resources
- Video: Buying vs. Leasing a New Location: I’ll walk you through some of the key things to think about when buying or leasing a new location.
- Course: Analyzing Whether to Add New Locations - A new location is a major commitment of time and money with the potential to expand a company’s business and increase profits. New locations also come with risks. I'll give you step-by-step guidance on how to decide whether a new location will increase profits or destroy value.
Get all the CFO Perspective resources with a FAST (Finance and Strategy Toolkit) membership.
