Benefits of Incorporating in Canada – Accountants Mississauga

Allan Madan, CA
 Oct 25, 2010
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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.

Disclaimer

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.

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Comments 5

  1. Hello there
    I’m a general practioner in Edmonton Alberta
    I liked your videos
    How much do you charge for personal and corporation tax ?
    Thank you
    D. Alshgagi

    1. Hi Dr. Alshgagi,

      Thank you. We are happy to know that enjoyed the videos.

      Generally speaking, Corporate Tax Services are quoted at a range of about $1,250 and include the following:

      -Preparation of Corporate Tax Return
      -Creation of a Tax Plan (with goal of minimizing personal and corporate tax)
      -Answering Inquiries throughout the year

      Fees can be lower or higher depending on the amount of work involved.

      Personal tax returns start at $75.

      We would appreciate the chance to be of service to you, and can be reached at our contact details noted on our website.

      We look forward to hearing from you soon and thank you for your inquiry.

      -The Team at Madan CA

  2. Hi there,

    I am planning to work as an independent contractor and thus want to incorporate. Can you please let me know how much you charge for incorporation services like advice to minimize tax return and filing tax return?

    Thanks
    Praveen

    1. Hi Mike,

      If you buy a property jointly with 5 other parters, then each partner should report their share of the income and expenses from the rental property on their individual tax return (form T776, Statement of Real Estate Rentals).

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