Canada - Sole Proprietorships vs Incorpartion

A

asurania

Hi;

If i was going to be working for prop form, and when i get my pay out i will be getting it as a contractor not an employee.

I will would have made $35 000 from salary from a different source other then trading.

Lets say from prop form i make $50 000 first year

Which brings many question which after reading this forum are unclear.

First question is

1. Sole Proprietorships vs Incorpartion ?

After i chooise what style

do i need to get a reg:
Federal Business Number (BN) Account
Goods & Services Tax (GST) Account
and a
Federal Payroll Deductions Account (if i incorpate)

also since i am not collecting any gst, do i need to pay gst for the money i get as a contractor from the corp firm

Thank you
 
the only difference between being a sole proprietor and incorporating for a prop trader would be your tax savings you would get from being incorporated. if your total income is well over 60k for the year that will put you in the highest tax bracket and it would save you some tax dollars by incorporating altho not a huge deal.
ive cleared over 100k from trading this year and remained a sole proprietor... the key is expenses... save receipsts you'd be surprised at the stuff you can write off.

dont worry about a gst # and that other stuff even if you incorporate...
 
If you incorporate, make $50,000, and actually put that money in your pocket, you'll pay the same amount in taxes.

It's true, corporate tax rates are lower, but when the money flows from the corporation to you, you pay the difference, so it's the same rate as if you weren't incorporated. Incorporating brings extra hassles, like keeping a minute book, seeing an accountant at least annually, since it's not practical to file a corporate return yourself, and it's more expensive.

It's a useful strategy to defer taxes, if you are making a lot more than you need to live off of. Otherwise, just file a T2124 statement of business activity on your personal tax return. Don't need a business number, GST # is only needed if you are collecting GST from customers.
 
Quote from lescor:

If you incorporate, make $50,000, and actually put that money in your pocket, you'll pay the same amount in taxes.

It's true, corporate tax rates are lower, but when the money flows from the corporation to you, you pay the difference, so it's the same rate as if you weren't incorporated. Incorporating brings extra hassles, like keeping a minute book, seeing an accountant at least annually, since it's not practical to file a corporate return yourself, and it's more expensive.

It's a useful strategy to defer taxes, if you are making a lot more than you need to live off of. Otherwise, just file a T2124 statement of business activity on your personal tax return. Don't need a business number, GST # is only needed if you are collecting GST from customers.
More...

I concur with Lescor, FWIW....and my guys in Canada file as individuals primarily.

The first 2 years of business may have a slight edge I'm told, but not nearly worth the overall expense and hassles.

(as always, my opinion, not legal or tax advice).

Don
 
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