Should I incorporate my BC company?

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Question

Hi
I run a successful online marketing business in Vancouver that I have been involved with since 2002. I’m getting a lot of conflicting advice on whether or not I should incorporate by business. Let me give you some facts and perhaps you can point me in the right direction:
  • I make about $190,000 gross and $130,000 net per year
  • I work from home
  • No employees, but lots of sub contractors (online help)
  • I’m married with 2 children under 18 years old
  • My wife have $20,000 in income per year
  • I make $15,000 from a teaching pension in addition to the income above.
My number is XXX-XXXX if you want to talk over the phone.
Thanks for your time.
Regards,
XXXXXXX

Answer

Dear XXXX

I get this question all the time and in each case it will depend on a specific set of facts. However let me do my best to give you a quick answer and if you have any other questions please give me a ring at 250-661-9417.

From a tax perspective it appears as though you may benefit from incorporating your business if you feel as though you can keep some earnings in the corporation year over year to help the business grow.

If you don’t need the full $130,000 per year for living expenses there can be a significant deferral of tax by leaving accumulated earnings in the corporation to grow at lower tax rates. Also consider that by incorporating you’ll have the ability to split some income with your wife if you planned on issuing her shares of the newly incorporated company.

If you ever decided to sell the shares of the corporation you would be able to shelter a significant portion ($750,000) of the capital gain providing that you met a specific set of prerequisite criteria.

Note however that if were to incorporate you would incur additional annual legal, accounting and tax preparation costs.

Those are some of the more significant considerations.

Give me a call at 250-661-9417 and we can discuss your situation in more detail.

Regards

Phil

Phil Hogan, CA
250-661-9417

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If you would like to reach me to discuss a tax or accounting matter please call 250-381-2400 or email me at phil@hutcheson.ca.

The accounting and tax information provided on this website is for informational purposes only and does not represent binding professional advice. Appropriate tax treatment and advice will depend on an individuals particular circumstances and set of facts.

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