Benefits/Drawbacks of Incoporating in Alberta?

[MickMcGeough]

I've been doing freelance web design / software consulting for quite awhile, but usually just to supplement a full-time employment income.

In the short-term I've got little interest in growing the "company" as a I have a really kick-ass job.

My freelance web clients don't usually care, but people looking to hire me hourly as a software consultant often want a business number. I've never bothered but this is in no small part because I haven't put the time in to get familiar with the benefits/drawbacks of doing so.

What are the benefits of a one-man-company incorporating, and based on the information I've provided, does it make sense for me?

[Shazam]

You need to talk to an accountant. Unless you want to lay bare what you earn, no one here can give you a definite answer.

Unless you're comfortable filing business taxes, you're going to shell out around $700 at least for an accountant every year.

[MickMcGeough]

Originally Posted by Shazam

You need to talk to an accountant. Unless you want to lay bare what you earn, no one here can give you a definite answer.

Unless you're comfortable filing business taxes, you're going to shell out around $700 at least for an accountant every year.

Well, I've been filing my own taxes for my freelancing/consulting for 7 years. Is it significantly different when you're incorporated?

[Shazam]

Yes, you need to provide financial statements. Quickbooks will do that for you but you need to put all your transactions into QB. You could just do that part and then take that to the accountant's where they'll do the other stuff and give you some tax advice.

[KTrain]

I operate my web and print design business as a sole proprietorship. It's easier and cheaper for me to do the taxes that way.

If you operate under a name other than your own you have to register that name. You are still able to file your taxes as you would a normal freelancer.

The only benefit I've found to incorporating is that you reduce your risk in case of a lawsuit. Right now, someone could sue me and everything I own would be fair game.

Here's the Alberta government site about starting a business that has lots of useful information: http://sbinfocanada.about.com/cs/sta...regalberta.htm

[Rockin' Flames]

I depends on a couple of things. If you incorporate you will have some additional costs such as incorporation fees, etc. The main reasons to incorporate would be as mentioned shelter your personal assets from the business in the event you get sued.

Another factor to consider is if you are making a sufficient amount of income that you would benefit from the lower tax rate of the corporation compared to what you would be paying personally. You will need to pay some form of tax when you take the money out of the corporation but you can control how much money to take out of the corporation during the year. Another benefit is if you want family to share in some of the profits of the company (ie. spouse, kids, etc.) you can achieve income splitting with them when money is taken out of the corp.

I largely set up a corporation for my wife's business due to the personal property protection and the tax advantages.

[Discoste]

Generalizing here:

Sole Prop - all profits and losses belong to you. You claim everything on your personal tax return every year. All liabilities are with you.

Incorporating- there's extra hoop you have to jump through with payroll and more paperwork (clients pay your company, then your company pays yourself). You have to file corporate tax return as well as your personal return.

The advantages are that you can keep money in the company and pay the lower corporate tax rate vs personal rate (and declare dividends). There's limited liability so people can't sue you personally (in most cases).