To Incorporate or Not?

Incorporating your business is not always necessary in all fields.  Incorporating conjures the images in many people's minds, that they need to be doing the volume of business of IBM. 

This is not the case at all.   AIS provides a host of incorporation services to simplify the process. Listed below are some key advantages to incorporating your business.

• Lower Tax Rate - Perhaps the most significant impact of incorporating your business is that of lowering your tax rate. This occurs because the earnings of your business can be retained within the corporation. Whereas the top tax rate in Ontario is about 46%, the corporate tax rate on the first $400,000 of income in a Canadian-controlled private corporation is about 21%.

• Income Splitting - Incorporating provides the flexibility to involve family members, with the resultant income splitting able to reduce taxable income.  Also, since a corporation can exist after death or retirement, the opportunity is available to provide pension and/or survivor benefits.

• Your Own Bank - Another advantage is the ability to borrow money from the corporation for a house or a vehicle.  These funds would either be paid out as dividends or reinvested into the corporation.

• Long Term Investment Fund - With the first $500,000 increase in the value of a private corporation being exempt from capital gains at the time of sale, the corporation can also act as a long term investment or pension fund.

• Liability Issues - By incorporating your business you reduce your own personal liability, which protects your personal assets from being seized should a problem arise with the business.