Draw the Law: Location Issues Part II, Buying the Land or Building

In the last post I talked about leasing and subleasing the location of your business, continuing in the vein of location I will briefly discuss buying a location and or using your home.

Buying the land and/or building for the Business

Considerations – space is very valuable in Hawaii and if you are fortunate enough to have the capital to purchase and own the land or building in which your business will sit that removes a lot of concerns with paying rent or dealing with an uncooperative landlord or property manager.   However, you will also then be responsible for a lot of those things that they had to handle, such as property taxes, utilities arrangements, construction and maintenance fees, and basically, you would be adding a land and property management to your property costs.  Lastly, from the legal perspective Hawaii is unique as it has two state land-recording systems.  Therefore, you will want expert help in drafting and executing any land conveyance documents and make sure they are filing in the correct system.

Right of First Refusal – one option that might be good for you starting out is start out with a lease arrangement, but have a “right of first refusal” clause or option attached to have the owner ask you if you would like to buy the property should they consider selling.  Therefore, you get to see if you like the space, can work with it, and ultimately if the landlord leaves you get asked to become the new owner before they approach new buyers.

Using your Home as a Business

This is everyone’s dream, right?  Work at home?  I’ll be honest I do it too when I am drafting lengthy agreement for clients.  It’s comfortable and does not require a 45-minute drive from the suburbs to Downtown Honolulu and allows you to focus without distraction.  It is sometimes very suitable for your business, especially if it is consulting, internet sales, marketing, or the like to have a home business.  Here are some things to think about:

  • Taxes– so long as we do not get drastic changes to the IRS code, there may be ways for you to deduct some of the expenses you incur in setting up your home office.  The biggest problem is satisfying the IRS that you are not some fly by night or hobby business. Some of the tests are complicated and specific.  Therefore, seek some professional advice on how best to approach.

  • Insurance – your homeowner’s or renter’s insurance may not cover owning and operating a business; that kind of insurance protects you from loss if there is a fire, but more importantly protect you if you are sued for negligently causing harm to a person on your property.  If it does not protect those situations, your guests or clients, may sue you and you will have to defend yourself.  First of all read your policy and then if it does not extend to a home-business situation contact your insurer and see if you can get an extension or a policy to cover.
  • Private Regulations – condo associations are governed by binding documents that affect what you can and cannot do in your building, such as starting and operating a business.  The same goes for many of those neighborhood associations or communities.  They have a restrictive covenant in place and it is all designed to keep the building or neighborhood a quiet peaceful place.  You will want to read the document and see if there are such covenants, and if there are it still may be possible to negotiate an exemption or change in the document to allow you to operate.

Once again, this is not an exhaustive list of factors you will need to consider for a home business, but a starting point to get you thinking.  As always if things seem overwhelming seek help from the experts to help mitigate unforeseen problems and bring up creative solutions. Next time I will be discussing zoning matters and how they can determine where you setup your business.

As always if you like this post or any of my other series please Subscribe to this blawg to receive updates to your e-mail.  In addition, follow me on Twitter @Rkhewesq and Like Me on Facebook under Ryan K. Hew.  If you need to contact me directly, please e-mail me at Ryankhew@hawaiiesquire.com.

See you on the next Draw!

*Disclaimer:  This post discusses general legal issues, but does not constitute legal advice in any respect.   No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction.   Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

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