Let’s demystify incorporation
You have been running a very unincorporated and successful business for quite a while, and after listening to all your business friends talk about incorporation, you are pondering. But, you have heard:
Incorporating will result in double taxation (At the corporate level, and then at the personal level).
MYTH!!!!!!. The Canadian Tax system (As opposed to the one of US counterpart) is one based on the concept of integration. Sounds like a tax geek word, but put simply, the way the system works (at least at the Federal level) is that you end up paying the same amount of tax whether you earn income directly, or through a corporation.
Incorporating will be a taxable transaction resulting in you paying taxes.
MYTH!!!!!!. The Income Tax Act gives you a special provision allowing you to incorporate your business without paying any tax.
So, Why Should you incorporate Really?
For starter, running your business through a corporation allows you to shelter your personal assets from business liabilities. Who wants to lose his house because he got personally sued by a customer?
A corporation gives you more flexibility on how you will remunerate yourself. Would it be a dividend? A salary? A bonus? You decide; obviously looking for your tax advisor to give you the best mix based on your own situation.
A corporation allows you to sprinkle income between your various family members. Finally, you get to do the same thing that every successful business man in Canada does.
Are there any cost?
Of course you have to factor your incorporation costs, and the slightly increased costs to maintain a corporation, but compared to the benefits, they are not significant.
Come see our Tax specialists, we will look at your particular situation, and advise you.