Benefits of Incorporating in Canada – Accountants Mississauga

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.

ABOUT THE AUTHOR

ALLAN MADAN

CPA, CA

Allan Madan is a CPA, CA and the founder of Madan Chartered Accountant Professional Corporation. Allan provides valuable tax planning, accounting and income tax preparation services in the Greater Toronto Area.

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