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WHERE TO NEXT | Tuesday, February 16, 2010 When should I incorporate my businessRecently I was asked during a client meeting, "when should I incorporate my business?"
The question has come up in the past and I thought I would take 2 minutes to describe a few of the benefits of incorporating your business.
One of the benefits of setting up and having a corporation is the option of paying yourself a salary or a dividend and you can defer un-needed income until future years. A usual rule of thumb is a business owner should routinely receive some income in the form of a salary. By taking some "salary" income it will allow you to; contribute to CPP, establish income for RRSP contribution calculations and also show income for child care expenses as well as setting up Individual Pension Plans.
There is another rule of thumb that as a business owner you would pay yourself a salary (bonus included) to a level that gave you the maximum RRSP contribution room ($124,722 - 2010), the rest of your income would be taken in the form of a dividend. A simple tax strategy lies in the fact that you do not have to pay tax on dividends until the following year.
An example would be; if you took a dividend in January you would not have to pay tax on it until April of the next year. This 16 months would give you time to invest the money (possibly a Tax Free Savings Account) and possibly produce a profit before you even had to pay the tax.
If you are an owner/manager considering incorporating, seek the appropriate tax and business specialists. We work very closely with local specialists and can introduce you to the right professional for your business.
We hope your expectations have been met and we have delivered on our promises, if not please let us know where we can improve. As a value-added service to my clients, friends, followers and fellow bloggers, I make myself available to act as a sounding board. You might have a friend who asks about me, or you feel compelled to make an introduction to help someone out. If that happens I will make time to offer objective advice that they can use to make an informed decision.
Take care
Dustin T Serviss - Kelowna Financial Advisor CommentsNo comments Post Your Comment: | |||
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