Commercial Rentals & Leasehold Improvements

Quite often the largest startup or remodeling expenses are these "leasehold improvements" or ("residential improvements" for home-based). The more you DIY or with family and friend assistance the more you save. However, even if you do complete DIY, chart your out-of-pocket costs here in the Building Improvements & Repairs section. Warning: It is EXTREMELY important that you provide the actual costs for these expenses to your accountant with receipts backup. Most or all of the costs in this category are NOT "operating expenses." Groomers make that mistake often! There are taxation consequences if you simply deduct these costs from your business income without "amortization or depreciation schedules." In other words you deduct these costs over a period of years stipulated by the tax codes. Don't get stung in an tax audit for making that serious mistake, it's a common but costly mistake when you do your own taxes and don't indicate depreciation schedules; that's a flag to tax authorities. Consult a tax professional for proper handling of building improvements and repairs costs.

Don't assume that landlords will pay for all or most or even half the building improvements you want. Every rental or lease contract is open to negotiations, even if they hand you a lease or rental contract. You can ask for changes to any contract stipulating the deal you strike with the landlord. Perhaps you agree to put new floors in and in return the landlord will upgrade to a bigger water heater and extra electrical. Great! Put it in writing in the contract!

Do your best to get the landlord to make as many building improvements as possible, but every situation is different. Sometimes they will even do all of them, but raise the rent. Well that might be OK if you are short on cash to pay contractors. These negotiations happen all the time in the real world. Commercial rental contracts always involve negotiations unlike contracts to rent apartments. In fact, big companies like Starbucks often provide their own lease contract to landlords and then the landlords stipulate changes!

Get savvy about how the commercial rental world works; every lease, every rental, is open to negotiations. You may go back and forth; it simply depends upon how motivated the landlord is to rent or lease their space, or wait for another tenant. Our best advice is to take the rental or lease contract you are supplied by a landlord to your business attorney and say, "What's wrong with the contract? What isn't in my best interests? What changes do you suggest?" That's smart, and that's the way professionals operate.