Incorporating your self to become a contractor

[MaDMaN_26]

A friend has to Incorporating herself in order to take a contract position and is getting confused about it all...

Does anyone know any good resources or FAQ's on how to do this... e.g. she was told she has to have stocks and she doesn't really want to deal with that but maybe she has to...

This forum always seems to have some experts hangin around so thought I'd see what came of it.

[Bill Bumface]

1. Register your company yourself at a regular registry (just make sure they have business services too).

2. Go down to Harry Hays and register for a GST number. Choose yearly submissions and 'quick method'.

3. Find a good accountant (They will no longer be able to rip you off for steps one and 2). They'll do the rest.

[Eddie Bronze]

Originally Posted by MaDMaN_26

Does anyone know any good resources or FAQ's on how to do this... e.g. she was told she has to have stocks and she doesn't really want to deal with that but maybe she has to...

Who told her that? Sounds kind of suspicious to me. Hulk outlayed it, that's all you have to do. I have a registered trade name which is one step down from becoming incorporated. I work for a guy who is incorporated and he has some friends who are as well. In all the discussions we've had about work, stocks were never mentioned.

[tkflames]

Originally Posted by MaDMaN_26

A friend has to Incorporating herself in order to take a contract position and is getting confused about it all...

Does anyone know any good resources or FAQ's on how to do this... e.g. she was told she has to have stocks and she doesn't really want to deal with that but maybe she has to...

This forum always seems to have some experts hangin around so thought I'd see what came of it.

She will have to have shares as does any incorporated company. However, this does not imply that she will have a public company (her stocks will not be traded on a stock exchange). Instead she can just make herself the 100% shareholder of the company and its no different than owning an unincorporated sole proprietorship (except the greatly reduced liability).
As said above, do the first two steps on your own, leave the rest to the accountant and especially when it comes to contracting, make sure you have a go-to lawyer if neccessary.

[Bill Bumface]

Originally Posted by tkflames

She will have to have shares as does any incorporated company. However, this does not imply that she will have a public company (her stocks will not be traded on a stock exchange). Instead she can just make herself the 100% shareholder of the company and its no different than owning an unincorporated sole proprietorship (except the greatly reduced liability).
As said above, do the first two steps on your own, leave the rest to the accountant and especially when it comes to contracting, make sure you have a go-to lawyer if neccessary.

Exactly, and if you want to get sneaky you can give away class B or C shares to family members/girfriends/boyfriends that make no money and pay them to do your "book keeping"

[DFO]

It might be worth finding a lawyer that might have numbered companies already set up - just have to set it up with your info & needs. That's the route I took and it was really hassle free. Cost me $300 six years ago. They also handle the ongoing annual filings & minute book for a nominal fee.

[r00t]

She needs to register like said before ... send her to the place in Bow Valley. If she wants a named company, it's gonna cost more and she'll need a NUANS search.

She can enroll for a GST # here: http://www.cra-arc.gc.ca/tax/busines...ns/menu-e.html

She will need to open a business bank account and will require her certificate of incoroporation to do so.

Also, she may be required to get WCB (depending on the contracting firm). You can sign up for most of it online.

Also, ask a certain short Sri Lankan contractor you currently work with for the contact info of a good accountant we both use.

The accountant can help with any other questions.

The first thing you do though is register the company. She can be President and CEO owning 100% of the shares in a privately held company.

[Bill Bumface]

Oh, also depending on where you contract, you might be responsible for proffessional liability insurance. Check that out as well.

It sounds really confusing, and the first year is a bit as you figure things out, but after that it's easy stuff and the tax savings make it well worth your while... 5 digits worth your while.

[simmer2]

Originally Posted by r00t

She needs to register like said before ... send her to the place in Bow Valley. If she wants a named company, it's gonna cost more and she'll need a NUANS search.

She can enroll for a GST # here: http://www.cra-arc.gc.ca/tax/busines...ns/menu-e.html

She will need to open a business bank account and will require her certificate of incoroporation to do so.

Also, she may be required to get WCB (depending on the contracting firm). You can sign up for most of it online.

Also, ask a certain short Sri Lankan contractor you currently work with for the contact info of a good accountant we both use.

The accountant can help with any other questions.

The first thing you do though is register the company. She can be President and CEO owning 100% of the shares in a privately held company.

Our lawyer recommended we not register for GST until you actually start doing some work. If she's going to be getting work immediately then you'll want to do that, but if not then you just end up doing a lot of paperwork for nothing.

She'll need to send something in to the WCB immediately though.

[Bill Bumface]

Originally Posted by simmer2

She'll need to send something in to the WCB immediately though.

Oh, and if you have to go through the WCB, be careful because they will try screw you. I sit at a keyboard all day and they tried to put me in a category that was double the rate I should be paying. God help me if I strain my right pinky and can't work anymore...

[corporatejay]

1) go to a lawyer

2) let them handle it...


it shouldn't be that expensive.

[Phanuthier]

Let me know how it goes. I've kinda wondered about it myself.

[STAMPEDRED]

Purchase "Incorporation and Business Guide for Alberta" from Chapters or wherever for $40.

Get the forms from the registrar and fill them out word for word as you see them in that guide she bought. The registrar is not legally allowed to give you any legal advice and will not/should not help you fill the forms out. Also, expect to pay ~$265 to incorporate.

That $40 is a huge savings from a lawyer. They do the exact same thing as you so it is well worth her time to do this without one. She will however need a lawyer for the annual minute book and yearly filings for the corp. But that can be done after the corp is up and running.

Lastly, do get an accountant. Taxes get really confusing in the corp and it is well worth the money spent on a good accountant. They should be able to save you more in taxes than you would figuring it out on your ownand more than cover what she would pay them for their time.

It is well worth it to incorporate. Heck, I've enjoyed it so much I've done it 3 times already!

[MoneyGuy]

I'm a financial planner and I've incorporated myself. I had a lawyer do it for me 'cause I didn't have the time. It was a little pricy that way. Doing it yourself isn't all that hard

. I advise clients on this kind of thing. Generally, there are two basic reasons to incorporate: for the limited liability and for the ability to keep money inside the corp at corp tax rates. Unless you have a sizable sum of money after expenses (an accountant can tell you how much, but for most people it's probably somewhere around 30-40K or more each year) then the second reason doesn't really apply to you. For the limited liabilty, there would be benefit there for a contractor. I know there is at least one lawyer on this site who may be able to comment on that.

There are annual costs of usually a few hundred a year even if you incorporate yourself, so keep that in mind.

[Bill Bumface]

Personally, I see zero need for a lawyer or a book. A good accountant will answer all of your questions. When I was shopping around some would charge to answer questions, which is really not what you want when you are new at it.

Registering your company and getting your GST number and bank account are very straight forward. After that, when you have a sit down with your accountant you'll know what you need to do during the year, which is basically just keep all your paperwork filed, pay some payroll (paying yourself $15,000 salary a year helps save some taxes) and other than that just transfer money to your personal bank account whenever you need it.

[First Lady]

Originally Posted by simmer2

Our lawyer recommended we not register for GST until you actually start doing some work. If she's going to be getting work immediately then you'll want to do that, but if not then you just end up doing a lot of paperwork for nothing.

There are two schools of thought on this. Most start ups incur their greatest expenses at the beginning. If you are not registered for GST, you will not be able to claim your ITC's, which could be sizable depending on your circumstances.

My 2 bits of advice.

Every incorporated business has shares, it can be as simple as 10 shares for $1.00 all owned by one individual. That is what allows you to draw dividends (rather than cash draws or salary) from the business. You will be taxed at a much lower rate on dividends.

Filing your annual (incorporation) return is very straight forward; most people can do it themselves or a bookkeeper can handle as well. I would not recommend paying either a lawyer or accountant for that.

Filing your annual corporate income tax return is best handled by an accountant. Start looking NOW, many are not taking new clients.

(Shameless plug for my proffession) If you have a ton of transactions or have organizational challenges; consider a bookkeeper. If you leave it all till the end of the year and have the accountant do it...it will be pricey. Bookkeeping rates are generally half of that of CGA's.... same applys here, start looking...many are not taking new clients.

[V]

I'm about to incorporate myself to start an engineering company on the side to complement my income. I'm guessing there are a couple extra things to look at here, including permit to practice and professional liability insurance. I have a couple questions:

How do you get paid, and how do you get taxed on that income? If I finish a project and receive payment from my customer (say $5,000) I'll get taxed on that money at a corporate tax rate, and then when I transfer money from the business to my personal account (or however that works) do I not have to pay personal income tax on that as well?

If I'm not planning on keeping more than a couple grand within the company at all times, is there any point in professional liability insurance? It's not like the company has any assets that I need to worry about losing.

[Kjesse]

I'll add my 2 cents to this. For the OP, probably a local registry and self help book will serve her needs but she needs to remember to file those annual returns. If she doesn't, the company will eventually get "struck" and its a real pain to fix that.

This all comes down to whether you want to pay for convenience and want to have it taken care of by someone who knows what they're doing. The larger your company, the more you will need a lawyer.

A law firm will charge you if you hire them to incorporate, maybe $300 to $700 over and above the registration fees for a simple and basic incorporation. You can do it yourself, but the law firm will have it done in a nice binder (minute book) with all the information tabbed and the necessary resolutions prepared. You'll also get some basic advice, but most of which is probably in those self-help books.

Most accountants provide a similar (and often exact) level of service, and are a good alternative. Like law firms, the fee varies, though most accountants are a little cheaper at this stage. (An accountant who has your minute book makes his money providing other services)

You have to have a registered office, and if you use your lawyer's or accountant's (or other provider's) office, they'll charge you an annual fee, but they'll take care of all the registration hassles. You'll just get a bill and some papers to sign every year. Again, the price varies greatly.

Anybody can spend a short period of time and learn to do it right. Many times I see well intentioned people doing it on their own to save money, but who end up with a headache or worse.

Use a good bookkeeper for your day-to-day services, an accountant at least annually if your taxes become more complicated, and a lawyer if you have something to protect.

[albertGQ]

Can a server at a restaurant incorporate themselves? Since they are kind of contracting their services out to the restaurant

[if.away]

Originally Posted by albertGQ

Can a server at a restaurant incorporate themselves? Since they are kind of contracting their services out to the restaurant

No, as a server you're a "true" employee. You don't use your own materials, you don't incur any extra expenses out of your own pocket, you have a set schedule, you most likely work only for that restaurant(no other clients) and your employer is vicariously liable for your brain farts. So that's a "true" employer-employee relation in my books.