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Incorporated yet?

Check out these tax avoiding facts…

Example 1: Active Nova Scotian companies pay tax at the extremely low-rate of 16%! As a shareholder of your company, you can pay yourself up to $30,000 of dividends and pay no additional personal tax! (Note 1)

Example 2: Other family members can be shareholders, even if they are not active in the business. Why is this desirable? Well, as in the previous example, we can pay each shareholder (18 years and older) up to $30,000 of dividends and pay no personal tax.(Note 1) This may be handy if you have a non-working spouse or children going to university or community college.(Note 2)

Example 3: Shares of Active Nova Scotian companies can be sold for tax free proceeds of up to $750,000.(Note 3) Multiply this benefit by each member of your family holding shares in your small business corporation and the savings become ludicrous!

What's the catch?

Reduced CPP pension for dividend-only personal income strategies

RRSP contribution room will not increase with dividend-only income strategies

Extra administrative costs (i.e. corporate tax return, income information slips, bookkeeping, etc.)

Overall, when should I consider incorporating?

Self-employed, and

Net earnings approaching or exceeding $60,000 per year

Would like to limit your liability to only the amount invested (i.e. protect your home against creditor claims)

Remember, everyone is unique. The decision to incorporate should always be discussed with your Chartered Accountant, in-depth, to see if incorporating your business is right for you.

Note 1: Assumes no other personal income

Note 2: The risks associated with splitting income with adult children should be discussed with your chartered accountant

Note 3: There are very stringent rules under the income tax act which must be adhered to for utilization of this benefit; these rules should be discussed thoroughly with your Chartered Accountant