What are the benefits of incorporating in Canada?
As a Chartered Accountant and Tax Expert in Mississauga, Ontario, Canada, I am aware of many benefits of incorporating your business, which are discussed in detail below.
Low Tax Rate – Benefit of Incorporation Canada – Accountants Mississauga
The first major benefit of incorporating is that corporations have a very low tax rate of only 16.5%. Contrast that to an individual in the highest marginal tax bracket who pays 46.4% in taxes.
“That means by incorporating, you could save up to 30% in taxes,” says Allan Madan, Accountants Mississauga.
Limited Liability Protection – Benefits of Incorporating – Accountants in Mississauga
The second major benefit of incorporating in Canada is that corporations offer limited liability protection. What that means is that in the event of a lawsuit against your corporation, your personal assets such as your house, your vehicle, and personal belongings are not at risk.
On the other hand, if you are a sole-proprietor or are a general partner in a partnership, and you are sued, then your personal assets will be at risk.
“If you are concerned about protecting your personal assets, you should incorporate,” says Allan Madan, Accountants in Mississauga.
Paying Dividends – Benefit of Incorporating – Accountants Mississauga
The third major benefit of incorporating in Canada is the ability to pay dividends to shareholders. If you are a shareholder of a Canadian Controlled Private Corporation, then you can receive up to $40,000 in dividends from the corporation, without paying any tax whatsoever at the personal level.
Income Splitting – Benefits of Incorporating – Accountant Mississauga
The fourth major benefit of incorporating in Canada is the ability to income-split with family members through the use of a corporation. This concept is an extension of the dividend payment concept above.
For example, let’s assume that you and your spouse own 50% each in a corporation that you’ve established and you wish to compensate yourself because there’s excess cash inside the corporation. You and your spouse could each withdraw $40,000 in dividends, that’s a total of $80,000, without paying any tax whatsoever – which is great.
The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.