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| Financial |
 Should I
Incorporate?By Debbie Patterson, owner of Odessey Business Services Incorporation and all of its complexities, why’s, when’s and how’s, are the questions I find I’m fielding most lately in the wake of Revenue Canada’s new stricter guidelines regarding subcontractors and the self-employed. My first response is, “Why do you want to incorporate?” Many large companies have changed their policies on contract positions due to Revenue Canada’s strict reporting guidelines, and this has prompted many self-employed contractors in many industries to incorporate to keep their contracts. Advice from family, friends, and Revenue Canada or influence from articles may also have the self-employed thinking that incorporation is the first or immediate next step. This is not always the case. If you are not in immediate danger of being sued for a mistake, and liability is not really an issue, then staying a proprietorship may suit your business better. If you run your business out of your home and use your personal vehicle extensively, it may be better to use those deductions on your personal income tax return, as these expenses used for a corporation will be different and not as extensive. There are pros for incorporation depending on your personal credit, size of business and liability issues. • A trade name and any trademarks can be protected. • As the owner, director, or shareholder, you can draw money from the company in different ways. A wage may be drawn, just as if you worked for someone else, with CPP and tax being remitted for you and a T-4 issued at the end of the year. This makes personal tax time a lot easier than a self-employed tax return. Money can be removed from the company tax free to pay back a shareholder loan, as well as be paid out in dividends, which would be shown on a T-5 at the end of the year. Management fees and bonuses are still more options to consider, depending on your company’s individual status. •In liability issues, an incorporated company can only be sued for its assets, whereas a self-employed person running as a proprietorship can be sued for personal assets, as the business is considered personal also. Some cons on this issue may include price, new detailed bookkeeping policies as well as possibly losing the use of losses incurred in the company if the company should fold. Notes to keep in mind when thinking about incorporating: •An incorporated company is all of the following: 123456789 Alberta Ltd. o/a ABC Services, as well as ABC Services Ltd, ABC Services Inc, and ABC Services Limited. •Incorporating is the act of registering a Limited Company Number for a business; it is NOT a Business Number. If you are incorporating after running your business as a proprietorship, a new business number is needed as you have started a new business. Debbie Patterson is the owner operator of Odessey Business Services, specializing in income tax. Visit her at www.odesseybusiness.com for more tax tips or contact her directly at 403.816.5098 |