Incorporate or not?

[JiriHrdina]

Looking for some input on this.

I have a part-time job that now has multiple "clients" and for that reason I'm starting to consider incorporating.

What are the advantages to doing this?

Is it worth the trouble or am I better served keeping things simple as a sole proprieter. (sp?).

[Kjesse]

In my view, yes, incorporation is almost always a good idea.

I don't think I could say it better than this link:

http://sbinfocanada.about.com/cs/sta...orporatadv.htm

If your business is smaller than say, $50K in revenue per year and you don't have a lot of supplier purchases, I might say don't bother.

Remember on an annual basis it will cost you money to keep the company active.

[Crazy Flamer]

Do it.

For liability issues and you also get tax breaks.

[GrrlGoalie33]

Originally Posted by JiriHrdina

I have a part-time job that now has multiple "clients"

This line could get you into a lot of trouble with fotze

[I-Hate-Hulse]

Would you need to withdraw the income earned from your "corporation" and pay it out as a salary? (Rather than holding it in the corporation) If so you'd lose much of the tax advantages from deferral of income, and much of the benefit of incorporating.

[Bobblehead]

There is additional overhead - accountants, legal fees, and so on.

Not a decision to be jumped upon - see your accountant and get their opinion based on your specific situation.

[troutman]

Speak to an accountant. My partner can give you advice about the pros and cons of incorporating. PM if interested.

[JiriHrdina]

Originally Posted by I-Hate-Hulse

Would you need to withdraw the income earned from your "corporation" and pay it out as a salary? (Rather than holding it in the corporation) If so you'd lose much of the tax advantages from deferral of income, and much of the benefit of incorporating.

That's the thing - this biz won't be my primary means of income - it will be a supplement to my regular job - and as such the income won't be a lot - but I likely would have to draw some of it.

Thanks for the responses.

[Bill Bumface]

Originally Posted by I-Hate-Hulse

Would you need to withdraw the income earned from your "corporation" and pay it out as a salary? (Rather than holding it in the corporation) If so you'd lose much of the tax advantages from deferral of income, and much of the benefit of incorporating.

If the corporation is your sole source of income, in most cases it's advantageous to only take $15,000 in salary and pay the rest as dividends.

I incorporated and saved $20,000 in taxes in one year compared to when I was an employee of a contracting company making the same amount.

[I-Hate-Hulse]

Originally Posted by hulkrogan

If the corporation is your sole source of income, in most cases it's advantageous to only take $15,000 in salary and pay the rest as dividends.

I incorporated and saved $20,000 in taxes in one year compared to when I was an employee of a contracting company making the same amount.

Very true - the optimal dividend / salary mix is probably something worth discussing with a qualified accountant though, as it'll vary from situation to situation.

[Mccree]

Originally Posted by hulkrogan

If the corporation is your sole source of income, in most cases it's advantageous to only take $15,000 in salary and pay the rest as dividends.

I incorporated and saved $20,000 in taxes in one year compared to when I was an employee of a contracting company making the same amount.

Also depends if you want RRSP deductions or not. Dividends do not count as earned income for RRSP purposes.

Over all Dividends give you the smallest tax bill as you save about 2% plus no CPP