Yes, a business can buy a house. LLCs, corporations, partnerships, and even sole proprietors do it every day, for office space, employee housing, rental income, or long-term investment. What matters more than the purchase itself is the entity that takes title, the loan you sign for, and whether the local zoning lets you use the property the way you plan to. Get any of those three wrong and the financial case for holding a house through a business falls apart.
Which Entity Should Take Title
The name on the deed decides who is on the hook if something goes wrong at the property. A sole proprietor holds the house in their own name, so there is no wall between the property and the owner’s personal bank accounts, car, or other real estate. A partnership can hold the property in the partnership’s name or in individual partners’ names, and disputes tend to get ugly fast when the partnership agreement does not spell out who controls it.
An LLC is the structure most buyers reach for, and for good reason. The house sits inside the LLC and the members sit outside it. If a tenant or visitor sues over an injury on the property, the claim is limited to the LLC’s assets and insurance rather than the members’ personal savings. Corporations give shareholders a similar shield.
The protection only holds if you actually run the entity like one. Commingling funds, skipping annual filings, or paying personal bills out of the LLC’s account gives a court reason to disregard the entity and let creditors reach through to the owners.
How a Business Finances a House
Businesses rarely pay cash. The loan options look different from a personal mortgage, and the terms are generally tougher on the borrower.
Commercial Mortgages
A traditional commercial mortgage typically asks for a down payment of 15% to 35% of the purchase price. Repayment terms run 5 to 25 years, with rates tied to your creditworthiness and the market. Amortization is often shorter than on a residential loan, which sometimes produces a balloon payment after 5 or 10 years where the remaining balance comes due at once.
SBA Loans
The Small Business Administration backs two programs that businesses use for real estate. The SBA 504 program splits the deal three ways: a bank funds 50%, a Certified Development Company covers up to 40%, and the borrower puts down as little as 10%. Maturity terms of 10, 20, or 25 years are available, and the CDC portion carries a fixed rate. The catch is that 504 loans cannot be used for speculation or investment in rental real estate, so the business generally has to occupy the property.1U.S. Small Business Administration. 504 Loans
The SBA 7(a) program is more flexible. It covers loans up to $5 million with terms up to 25 years for real estate purchases, and down payments tend to run lower than a conventional commercial loan.2U.S. Small Business Administration. Terms, Conditions, and Eligibility Either SBA program is worth pricing out before you sign a standard commercial mortgage.
Seller Financing and Hard Money
Seller financing means the seller carries a note on terms you negotiate directly. It can work when traditional financing falls through, or when the seller wants to spread out the tax hit on the sale. Hard money loans come from private lenders, close quickly, and are secured by the property itself rather than by your credit. Rates are higher and terms are shorter, so hard money tends to work best as bridge financing when you plan to refinance into a conventional loan soon after closing.
The Personal Guarantee Catch
This is where the LLC’s liability shield gets a hole cut in it. Most commercial lenders require the business owner to personally guarantee the loan, which means if the business defaults, the lender can chase your personal assets to collect. The property is still titled in the entity’s name, and the LLC still protects you from a slip-and-fall claim by a tenant, but the mortgage lender has a direct line to your finances. Some lenders will accept a limited guarantee capped at a percentage of the loan rather than a full one, so it is worth asking.
Zoning Decides What You Can Actually Do With It
Buying the house is the easy part. Using it the way you intend might not be. Residential properties are zoned for residential use, and local zoning ordinances restrict what activities can happen on the property. Running a retail operation, a warehouse, or a client-facing office out of a house zoned for single-family use can end in fines, a forced shutdown, or both.
If the current zoning does not permit your planned use, there are two main paths. A use variance allows a property to be used in a way the ordinance would not normally permit, such as converting a residential property to commercial use. Getting one means applying to the local zoning board, showing that the existing zoning creates a genuine hardship, and surviving a public hearing where neighbors can object. Approval is not guaranteed and the process runs months. A conditional use permit is sometimes easier to obtain and may allow specific commercial activities in a residential zone, subject to conditions like limited hours or added parking.
Check zoning before you make an offer, not after. A house that cannot be rezoned for your purpose is a house you should not buy.
What Closing Looks Like for a Business Buyer
The mechanics resemble a normal residential closing with a few extra layers. When an individual buys a house, they sign the papers and it is done. When an entity buys one, the seller and title company need proof that whoever is signing has authority to bind the entity. For a corporation, that is a board resolution authorizing the purchase and naming the specific officers who can sign closing and financing documents. For an LLC, the operating agreement or a member resolution serves the same purpose. Expect the title company to ask for certified copies before closing.
Closing costs vary by jurisdiction. Transfer taxes, in states that impose them, generally range from a fraction of a percent to roughly 1% to 2% of the sale price, and recording fees for filing the deed run from about $10 to $85 depending on the jurisdiction and document length. Budget for those on top of the down payment.
Tax Treatment While the Business Owns the House
Owning through a business unlocks deductions an individual homeowner does not get, though the rules have more edges than most buyers expect.
Depreciation
The business can deduct the cost of the building (not the land) over its useful life. The recovery period depends on how the property is used: residential rental property is depreciated over 27.5 years, and nonresidential real property is depreciated over 39 years.3Office of the Law Revision Counsel. 26 U.S. Code 168 – Accelerated Cost Recovery System For a house, that means 27.5 years if it is used as a rental dwelling and 39 years if it is converted to office or commercial space.4Internal Revenue Service. Publication 946 – How To Depreciate Property
Depreciation is a non-cash deduction that reduces taxable income each year, and it is one of the main reasons businesses buy real estate. The IRS does not let you take those deductions for free forever, though. They come back on sale.
Property Taxes and Operating Costs
Annual property taxes on the assessed value are fully deductible as a business expense. So are mortgage interest, insurance premiums, repairs, and maintenance. Together these offset the property’s carrying costs and can meaningfully reduce the business’s tax bill.
Tax Treatment When the Business Sells
Selling a business-owned house is where the surprises usually surface, because two separate tax rules apply to the same sale.
Capital Gains
If the business sells for more than its adjusted basis (the original purchase price minus accumulated depreciation, plus any capital improvements), the profit is a taxable gain. Property held longer than a year generates long-term capital gain, taxed at lower rates than ordinary income. Property held a year or less produces short-term gain, taxed at ordinary income rates.5Internal Revenue Service. Topic No. 409 Capital Gains and Losses How the gain flows to the owners depends on whether the entity is an S-corp, C-corp, LLC, or sole proprietor, which is a conversation to have with a CPA before you list the property.
Depreciation Recapture
Every year of depreciation deductions lowered taxable income, and the IRS takes that benefit back on sale. The portion of the gain attributable to depreciation you previously claimed, called unrecaptured Section 1250 gain, is taxed at a maximum rate of 25%, which is higher than the standard long-term capital gains rate most taxpayers pay.5Internal Revenue Service. Topic No. 409 Capital Gains and Losses Any remaining gain above the depreciation amount gets the ordinary capital gains treatment. Forgetting about recapture when estimating sale proceeds is one of the most common and expensive mistakes.
1031 Exchanges
Selling one business or investment property and buying another can defer the whole gain, recapture included, through a Section 1031 like-kind exchange. The replacement property has to be real property held for business use or investment; a property you plan to flip does not qualify.6Office of the Law Revision Counsel. 26 USC 1031 – Exchange of Real Property Held for Productive Use or Investment
The deadlines are strict. You have 45 days from transferring the relinquished property to identify potential replacements, and 180 days to close on the replacement.6Office of the Law Revision Counsel. 26 USC 1031 – Exchange of Real Property Held for Productive Use or Investment Miss either and the exchange fails, making the whole gain taxable in the year of the sale. Most businesses use a qualified intermediary to hold the exchange proceeds, because touching the funds yourself disqualifies the transaction.
Insurance and a Few Compliance Loose Ends
A standard homeowner’s policy will not cover a house owned by a business. You need commercial property insurance, plus commercial general liability coverage if anyone other than the business occupies the property. If you transfer a house you already own into a newly formed LLC, confirm with your insurer that the new entity is named as the insured. A policy still in the individual owner’s name may not cover claims that arise while the LLC holds title.
Watch the due-on-sale clause when transferring an existing property into a business entity. Most mortgages give the lender the right to demand full repayment when ownership changes, and moving title to your LLC counts. Some lenders enforce this and some do not, but the risk is real enough to raise with your lender before you record a new deed.
As of March 2025, FinCEN’s interim final rule exempts all entities created in the United States from beneficial ownership information reporting requirements under the Corporate Transparency Act.7Financial Crimes Enforcement Network. Beneficial Ownership Information Reporting Domestic LLCs and corporations that buy real estate currently have no federal BOI filing obligation. FinCEN is expected to issue a revised final rule, so if you form an entity specifically to hold a property, keep an eye on where that lands.