RISING WOMEN EXPERTS... 

To incorporate or not to incorporate...that is my question.
    By Diane Colton of Mobility Tax

Everyone you speak to have an opinion on this. I am sure you have heard “your business is will be perceived as more legitimate” many times. While there can be many benefits to incorporating, do your research before you go ahead. Here are some quick thoughts:

Incorporating now means additional paperwork, record keeping, and regular reporting and submissions to the Government. Corporate returns are based on the corporate year, for example: June 10 to June 9 of the following year (some exceptions). Personal and non-incorporated returns are based on calendar year. Income or dividends paid to you by your corporation are based on the calendar year regardless of corporate year.

How do you get your income out? Do you pay yourself as an employee, salary, bonus or dividend? This can mean source deductions and remitting instalments to the CRA on a regular basis for both taxes and CPP. If the net income is low, you may end up paying more in taxes then if you were not incorporated. If your income is going to be under $100,000 you may want to do a comparison to see which works best. How you pay yourself can also have an effect on RRSP deduction room. Dividends, while least taxable to you, can have a major effect on getting personal loans, mortgages/renewals. Any T-slips the corporation issues have a due date and penalties can be assessed for late submissions to the CRA.

You need to keep a proper set of records. Shoeboxes won’t work. Don’t mix business with personal; expenses that is! Your business account is for the business. This can be costly to you as your bookkeeper has to extract these transactions from your business books. The business should have a separate credit card (whether incorporated or not) for your business. When you are getting both your personal and business taxes done the numbers need to be accurate. As well, any financial institution or an investor will want to see what your business is doing.

If you are looking for a loan or approaching investors then a comprehensive detailed business plan is the order of the day which includes accurate financial statements. Financial institutions may also ask for personal guarantees on any business loan you may want.

These are just a very few elements to look at and there are so many more to consider. To your success!

For more advice on starting your business, contact Diane Colton of Mobility Tax at 403.475.3312. To learn about her business seminars, visit www.mobilitytax.ca