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Incorporating a business in Canada offers several advantages, including limited liability protection, potential tax benefits, enhanced credibility with customers and partners, and the ability to raise capital by issuing shares.

The process of incorporating a business in Canada involves selecting a business name, preparing the necessary documents (articles of incorporation), filing the documents with the appropriate government authority (federal or provincial), paying the required fees, and obtaining a certificate of incorporation.

Operating a corporation comes with legal and financial responsibilities, such as maintaining proper corporate records, filing annual reports, holding shareholder meetings, adhering to tax regulations, and fulfilling financial reporting requirements.

Incorporating a business can provide potential tax advantages, such as income splitting opportunities, the ability to claim certain business expenses, and access to small business tax deductions. However, it's essential to consult with an accountant or tax professional to understand the specific tax implications based on your business and personal circumstances.

One of the primary benefits of incorporating a business is limited liability protection. As a separate legal entity, the corporation's debts and liabilities are generally separate from the personal assets of its shareholders, reducing personal risk and protecting personal assets.

When naming a corporation in Canada, the name must comply with certain rules, including being unique and not misleading, not infringing on existing trademarks, and including a legal element such as "Inc." or "Corp." Consult the government's guidelines for specific naming requirements.

While it is not mandatory, seeking professional assistance from a lawyer or accountant during the incorporation process is highly recommended. They can provide valuable guidance, ensure compliance with legal and financial requirements, and help structure the corporation appropriately.

Yes! In Canada, you can operate a corporation from your home address. Many entrepreneurs choose this option for its convenience and cost-effectiveness. It's important to note that while you can use your home address as your corporation's registered address, there are some considerations to keep in mind.

• Zoning Regulations: Check local zoning regulations to ensure that -running a business from your home is allowed in your area.

• Home Office Deduction: If you use a portion of your home exclusively for business, you may be eligible for a home office deduction, which can provide tax benefits. Check out our post from earlier this week to learn more about the types of deductible business expenses.

• Privacy: Keep in mind your address will be publicly available in corporate records.

• Mailing Address: If you'd like to keep your home address private, consider having a separate mailing address.

• Legal Implications: Operating a corporation from home doesn't affect the legal structure of your business, but it's important to maintain a clear distinction between personal and business affairs.

It's always a good idea to consult with a legal or tax professional to ensure you're making the best decision for your unique situation. Feel free to ask more questions if you need further clarification!

The costs of incorporating a business in Canada include government filing fees, professional fees (if using a lawyer or accountant), and ongoing costs such as annual filing fees and accounting fees. The exact amount can vary depending on the jurisdiction and professional services required, expect to spend somewhere around $1,000 to get the process rolling.

Corporations in Canada have ongoing compliance obligations, including filing annual reports, maintaining proper corporate records and documentation, holding shareholder meetings, and filing tax returns. Consulting with professionals can ensure compliance with these obligations.

Yes, there are various tax incentives and benefits available to small businesses in Canada, such as the small business deduction, tax credits for research and development, and access to certain government funding programs. These incentives can help reduce the tax burden and support business growth.Item description

Yes, it is possible to convert an existing sole proprietorship or partnership into a corporation. The process involves transferring assets and liabilities, complying with legal requirements for incorporation, and potentially seeking professional assistance to ensure a smooth transition.

Certain industries or professions in Canada may have specific regulations, licensing requirements, or professional governing bodies. It's essential to research and understand any industry-specific rules or restrictions that may apply to your business.

Yes, a corporation in Canada can have multiple shareholders and directors. The specific requirements and limitations may vary depending on the jurisdiction and the corporation's structure.

In Canada, businesses can choose to incorporate either federally or provincially. Federal incorporation provides nationwide recognition and uniformity, while provincial incorporation is limited to operating within the specific province. The choice depends on factors such as business scope, future expansion plans, and regulatory considerations.

A hybrid approach is always optimal depending on what is important to you. For instance, if you are planning for retirement (via RRSP, CPP or setting money aside for the purchase on your first home, then you should look towards paying yourself a decent salary. Payrolls are tax deductible by corporations, therefore you will likely pay more in personal income tax, but less in corporate tax. A salary also keeps you up to date in your social safety net contributions (parental leave plan, healthcare, etc.), and can be useful if you plan to take out a personal loan or mortgage with the bank in the next 2 years. Whereas, dividends are taken from retained earnings, this money would be subject to the full corporate tax rate. However, dividends to another corporation setup as a Holding company (owned by you) can receive dividends at a 0% tax rate. The key would be to understand how much to pay yourself to remain within a low personal income tax bracket, and smartly manage your business profits to minimize your corporate tax. Get started to know how.

In short, a hybrid approach can work best, with an optimal tax withdrawal structure between salary and dividends

A payroll less than 30K (check the government website to verify if this amount applies to your province) is not taxable, but it depends if you are planning to apply for a personal loan or mortgage sometime in the next 2 years.

To be eligible for a mortgage, the bank normally looks at the average of the last two years of your individual gross salary, whether you are purchasing property from your personal account or corporation (regardless of how profitable your business(es) are). The rough estimate is 4X your gross salary. For example, you want a $400K mortgage, you should look to pay yourself a salary of ~100K.

Depending on the mortgage you are looking for, consider your salary to be ¼ of the cost of the home.

A Trust is not a corporation – it’s a person/patrimony and allows a flow through to pay yourself as a beneficiary.

Other benefits include:

• Not taxed on income in case of death

• Holding shares directly or via Trust mean you do not pay income tax on the first $900K of capital gains from sale of shares

Bonuses are taxed at the same marginal tax rate than your employment income tax.

In intercorporate dividends and loans. Intercorporate Dividends are taxed at 0%, after corporate income taxes are paid via the Operating corporation. And a Shareholder loan is taxed at 0% with no income tax payment, but the amount needs to be returned to the Operating company in full within 12 months time along with interest payments.

Owning real estate can provide individuals with similar tax advantages that a corporation provides, without having to incorporate

• Certain expenses can be deducted, like property upkeep, maintenance, improvements, interest paid on mortgage

• Gain from value depreciation, wear and tear overtime decline property value even when it is increasing

• Deferrable tax hits, use capital gains reserve to buy and sell real estate and differ tax hit at a more advantageous time

You should primarily do annual filing for corporate charter if your GST/HST numbers were received, otherwise the business is be considered dormant.

When you plan to start paying yourself a payroll and/or your corporation starts making sales >30K in the fiscal year you should register for GST/HST numbers. Look at the CRA website to find out how.

Create a recharge (similar to an invoice) and send it to your corporation, the corporation will then transfer you the funds, which will be tax deductible to the business if it’s considered a business expense. You will then need to recognize this as an employment income and pay the related personal taxes on it

GST/QST can be claimed on expenses paid 3 months before GST/HST numbers are setup, not before

Setup a USD bank account to manage currency exchange smartly

• If the company profits less than $500K - the small business rate of 12.2% would apply

• If the company profits more than $500K – the small business rate does not apply, your corporation will pay closer to 26% tax rate

• If the business is considered a Personal service business (one customer), different rates apply ( 38% tax rate)

• Check the government website for the most up to date information pertaining to your province

• For less than $500K - If it is considered a regularly active business in Canada, the small business rate of 12.2% would apply

• For more than $500K - results in approximately 26% tax rate

• If the business is considered a Personal service business (one customer) = 38% tax rate

The corporation will be considered a personal service business (PSB) which may result in a tax rate of approx. 38%. The key is to ensure you have multiple clients to be eligible for lower corporate tax bracket.

No, a portion of profits cannot be exempt from taxation for re-investment, but you should consider government programs such as SR&ED which provide tax credits for the business on spend that has gone into Research and Development work. Read more about the programs offered by the federal and provincial governments of Canada.

Yes. Intercorporate dividends (from corporation to corporation that own common shares) are tax free if a Holding company is setup.

Access Free Content, Business expenses that are tax deductible to know more

Access Free Content, Business expenses that are tax deductible to know more.

Once you hit the $100K mark in revenues and have at minimum 3 customers, otherwise the corporation may be considered Personal service business (PSA) which do not have the same tax benefits as a corporation.

• Rental income is considered passive income. Under a corporation it is taxed at 51%, Under personal = 38%

• Capital gain tax = 25% in both cases (included in income for personal)

• You can pass a loan from your corporation to your personal account or LLC for the downpayment of new property - then arrange financing mortgage (first deed of trust)

• Loans can be paid out anytime from the income of your corporate (as a debit) into another corporation or to you personally (credit), with an interest of ~0.5% for example

• Deposits from personal are after income-tax, so costs almost double !!

• Can negotiate a personal loan interest rate even if via corporation

• No, Equity in Canada is predetermined – no ability to predict hours and money tin the future time

• This also depends on whether or not you have the same class of shares, if so, the same dividends are payable. Also, you can setup a shareholder agreement that supersedes this rule.However, can move into a “Discretionary shares” asset class – which allows management to decide the amount of dividends to be paid out to shareholders

You need to do a Tax election filing when changing ownership structure (avoid income tax as a disposition) - If the company has a valuation, then the transfer of shares has a capital gain tax to be paid.

No, loans are balance sheet items, taken after income-tax.