Limited versus Propreitor

[Cyle]

Just make sure you want to commit all that stuff to your business to write off some of it, cause if the company goes south they will take everything you "bought" for business reasons cars, trucks, sleds, quads, offices(houses). I know some people going through that came and took everything last I heard they were going after the house they cannot take the house but they were going after the equity in the house. Now everything has turned around for them business is booming for they but they cannot buy equipment they buy in other peoples names and "rent" it from them, and have to pass on big contracts in favour of cash money cause the gov't still wants more. If it is a small company and your just trying to get a bit a free money back it isn't worth it sometimes it is best to leave what is yours is yours and what is the companies is the companies have a line drawn in the sand. Accountants are just as bad lawyers they will show you the loops holes to stick you head through to hang yourself for a buck....just sayin

Simple solution, something goes south the company misses a payment on the stuff and you repo it all, you make SURE your owed money on everything the company has. If it's a limited company once it's back in your personal name none of it can be touched. House can't be touched either unless there was a personal guarantee.

 

[Cyle]

O and as everyone has said CRA is a BITCH. I just got reviewed, back to 2008 since my accountant fawked up badly. CRA also had to fix all my taxes because NOTHING was right, I now have to go back threw all those years myself to make sure everything is finally right. CRA is being ok about it but it's still a pain in the a$$, spent over 2 hours on the phone with them trying to get things fixed. In the end I owe them about $3,000 in back taxes because of mistakes, and they are not charging much for penalty or interest. So it could be worse......but i'm still not happy about it.

I am looking at doing the same thing as I currently work for my dad as contract but I am going to get my own company and get paid that way to reduce taxes. I do agree though it is SO confusing. But in my first year atleast, I am going to sell my personal vehicle to the company for say $20,000 and the company can make payments on it so that money is 100% tax free in my pocket(i'm pretty sure atleast it is). I don't know for sure but I think you can even charge decent interest to get even more money out tax free?

 

[Cyle]

I don't mean to de-rail the thread but i've got a question. CRA is going back to 2008 and changing my employee-employer status with my dad from sub-contractor to employee. My question is, is there anyway for me to go back (now that i'm starting my company) and change it to something else where I can write off stuff? I haven't sent in anything for 2011 yet, but the company won't be started until now. They determined I am an employee not a sub-contractor. Not because of facts, they want more taxes, the person is RETARDED to believe I am considered an employee. Anyways, anything I can do to change it?

 

[storm1972]

are you payed by your dad?
if so does he do source deductions on what he pays you , or do you do them yourself?
as a subcontractor, ideally you want to be covered by your own wcb, do your own source deductions, weather its bi weekely or whatever, you should also carry liability insurance, and a gst#

if he is paying you for work your doing for him, and he is carrying all the insurance, gst, wcb and doing a payroll.........sorry you are an employee in my books

Myself , i carry business liability for 2 million, pay gst quarterly, and pay taxes at year end... (which kinda really sux this year, needless to say the thread topic), i dont own my vehicle or utility trailer, i have leased them both, as it is 100% written off payments, where if you own them you write the depreciation value off.
I have 1 guy right now that works with me, i do not consider him an employee, as i pay him a direct per/hour amount for every hour he works, and i do not have him on payroll, he has to do his own deductions ect if he so chooses. The only thing i have him covered on is under my WCB, nothing more. So thus he is classified as a subcontractor/contract labourer

 

[hevy_chevy67]

I don't mean to de-rail the thread but i've got a question. CRA is going back to 2008 and changing my employee-employer status with my dad from sub-contractor to employee. My question is, is there anyway for me to go back (now that i'm starting my company) and change it to something else where I can write off stuff? I haven't sent in anything for 2011 yet, but the company won't be started until now. They determined I am an employee not a sub-contractor. Not because of facts, they want more taxes, the person is RETARDED to believe I am considered an employee. Anyways, anything I can do to change it?

If the CRA already considers you an employee of your dad, you will want to find out how they will treat you once you form a corporation. There are rules that the CRA could deem your corporaiton a 'personal services corporation', and you don't want that. If your deemed a PSC, the only thing you can expense through your company are the wages to pay to yoursef. These rules are in place to prevent people that work for someone who are considered an employee who then go and form a corporation where they can put things like insurance, gas, etc through. The CRA will view the corporation as an 'employee', and thus they think the only expense it should have is wages.

 

[Cyle]

are you payed by your dad?
if so does he do source deductions on what he pays you , or do you do them yourself?
as a subcontractor, ideally you want to be covered by your own wcb, do your own source deductions, weather its bi weekely or whatever, you should also carry liability insurance, and a gst#

if he is paying you for work your doing for him, and he is carrying all the insurance, gst, wcb and doing a payroll.........sorry you are an employee in my books

Myself , i carry business liability for 2 million, pay gst quarterly, and pay taxes at year end... (which kinda really sux this year, needless to say the thread topic), i dont own my vehicle or utility trailer, i have leased them both, as it is 100% written off payments, where if you own them you write the depreciation value off.
I have 1 guy right now that works with me, i do not consider him an employee, as i pay him a direct per/hour amount for every hour he works, and i do not have him on payroll, he has to do his own deductions ect if he so chooses. The only thing i have him covered on is under my WCB, nothing more. So thus he is classified as a subcontractor/contract labourer

All taxes are all me, it's his work and no I don't have any of that. But once I register as a limited company I will be viewed as a sub contractor. It's pretty much exactly what you have with your employee, how do you view it different? My brother is a limited company and is covered under all my dads stuff only thing my brother has is liability insurance.

 

[Cyle]

If the CRA already considers you an employee of your dad, you will want to find out how they will treat you once you form a corporation. There are rules that the CRA could deem your corporaiton a 'personal services corporation', and you don't want that. If your deemed a PSC, the only thing you can expense through your company are the wages to pay to yoursef. These rules are in place to prevent people that work for someone who are considered an employee who then go and form a corporation where they can put things like insurance, gas, etc through. The CRA will view the corporation as an 'employee', and thus they think the only expense it should have is wages.

That's good to know, but it's not final I am fighting with them over it. But I also do work with my brother under his company. Plus I will just do a few jobs for others, then CRA can't say anything. The person who reviewed it was a idiot, I told her things then when she spoke to my dad she was like "I didn't know that". I was there and heard exactly what he told her I really don't think she documented anything just made some decision based off nothing.

 

[Oldtrick]

You will definately want to make sure you are either an employee of Ltd Co and totaly seperate from your Dad.
It's one thing to nickle and dime the tax man, but if you form a Ltd., you'll need your own insurance to protect yourself and your dad if he is a contractor. A standard CGL policy will not give him coverage for a subcontractor and it takes seconds to have a $35K FU.
If all your worried about is your vehicle and expenses, have your dad pay you mileage, like a $1/km. It's a non taxable expense and I do it for my employees.

As a business, storm, start a second holding Co. - PM me if you want and I can give you some info

 

[kbrunlees]

Storm I would be concerned about you paying your contractors WCB payments. I think you might be on slippery ground. A contractor by definition is responsible for all their WCB, Taxes , liability insurance etc. If you are paying any of it you could be deemed to have an employer. employee relationship.

 

[Cyle]

You will definately want to make sure you are either an employee of Ltd Co and totaly seperate from your Dad.
It's one thing to nickle and dime the tax man, but if you form a Ltd., you'll need your own insurance to protect yourself and your dad if he is a contractor. A standard CGL policy will not give him coverage for a subcontractor and it takes seconds to have a $35K FU.
If all your worried about is your vehicle and expenses, have your dad pay you mileage, like a $1/km. It's a non taxable expense and I do it for my employees.

As a business, storm, start a second holding Co. - PM me if you want and I can give you some info

Ya my dad has everything from WCB, insurance, etc and know i'm covered. The only thing i'd need if I go ltd is insurance. Actually, i'm not sure what he has but it covers sub contractors to.

Paying per km is a really good idea, it would cut down on taxes, which is all i'm trying to do. Is there anything else like that, that can be used? I know a few things to get my income down, but nothing else like a ltd company. I mean I would pay pennies in taxes compared to now. The reason I ask is, with the changes CRA made and me not being able to write anything off for 2011, i'm looking at $10,000+ more in taxes for last year, which REALLY pisses me off. Because I am legitimately a sub-contractor, the only reason they are viewing it as an employee is it is my dad.

I'd like to know where a employee chooses what days and hours they work, can leave a job anytime they want, has to buy their own tools, use their vehicle at their own cost, is paid per job (and is responsible for fixing errors for no extra pay), can refuse a job for no reason, and so on. Which is why I am so fuming about the changes, i've never heard of a regular employee with benefits/downfalls like that.....

And the thing is like I told them, it's my dad so there is so many things that cross between the family and work relationship. The ONLY good thing they did is rule I don't have to pay EI because I can't collect it, but that was obvious.

I fully plan to fight them on it, but I think i'd have better luck talking to a wall....

 

[Cyle]

Storm I would be concerned about you paying your contractors WCB payments. I think you might be on slippery ground. A contractor by definition is responsible for all their WCB, Taxes , liability insurance etc. If you are paying any of it you could be deemed to have an employer. employee relationship.

Is there different types of WCB though? Because I am 100% positive my dads covers other sub-contractors. As we have had some on sites and been required to submit WCB for the sub-contractors, and this is for completely separate companies.

I know insurance is needed and taxes is separated though.

 

[kbrunlees]

there may very well be, I know that if you have someone working in your house doing a job for you and they get hurt, you are liable if they don't have WCB. I guess the best answer would be to check with WCB officialy. I just know for my field I must provide proof of WCB (actually they can call to confirm) and Liability insurance to the tune of Two million per year. seems some murky answers are about.

 

[Cyle]

there may very well be, I know that if you have someone working in your house doing a job for you and they get hurt, you are liable if they don't have WCB. I guess the best answer would be to check with WCB officialy. I just know for my field I must provide proof of WCB (actually they can call to confirm) and Liability insurance to the tune of Two million per year. seems some murky answers are about.

Yep I know that's the case about homeowners, they can be screwed in a lot of ways. But WCB might vary depending on the field of work or something? Don't know for sure.

 

[storm1972]

yes there are different types of coverage for wcb, and different rates depending on what you do, As a general contractor most have wcb coverage that covers the subtrades on site, although most subtrades have their own wcb coverage., Higher risk jobs such as roofers pay more for their premiums, it all depends on what you do, and what amount of coverage is required .

 

[mathrulz]

I'm no expert on this topic either but I've worked with lots of consultants and contractors out there and dividends is the way to go. Not showing actual personal income will affect being able to get loans and mortgages and stuff, but if you already have that setup you should be okay. Either way how do you figure you are paying 50% tax? Even if you took it all as personal income only the highest bracket portion would be taxed at 40 some %.

The employee/sub-contractor debate... If you're just setting up a company now how can you have previously called yourself a sub- contractor? A sub-contractor is just a contractor who works for another contractor. If you were getting pay cheques from your dad (or his company) to your name - I don't see how you would be anything but an employee. Lots of people in different lines of work are part time, seasonal, go from job to job or project to project, etc... but they are still employees. You can't just decide to call yourself a contractor because you don't have a steady job with the same project all year...

 

[KawisakiRider]

If you sub contract but work exclusively to the same contractor they will consider you an employee, I just went through this last year. You either need to contract directly or work for other contractors every once
and a while

Ya my dad has everything from WCB, insurance, etc and know i'm covered. The only thing i'd need if I go ltd is insurance. Actually, i'm not sure what he has but it covers sub contractors to.

Paying per km is a really good idea, it would cut down on taxes, which is all i'm trying to do. Is there anything else like that, that can be used? I know a few things to get my income down, but nothing else like a ltd company. I mean I would pay pennies in taxes compared to now. The reason I ask is, with the changes CRA made and me not being able to write anything off for 2011, i'm looking at $10,000+ more in taxes for last year, which REALLY pisses me off. Because I am legitimately a sub-contractor, the only reason they are viewing it as an employee is it is my dad.

I'd like to know where a employee chooses what days and hours they work, can leave a job anytime they want, has to buy their own tools, use their vehicle at their own cost, is paid per job (and is responsible for fixing errors for no extra pay), can refuse a job for no reason, and so on. Which is why I am so fuming about the changes, i've never heard of a regular employee with benefits/downfalls like that.....

And the thing is like I told them, it's my dad so there is so many things that cross between the family and work relationship. The ONLY good thing they did is rule I don't have to pay EI because I can't collect it, but that was obvious.

I fully plan to fight them on it, but I think i'd have better luck talking to a wall....

 

[sweld]

If you sub contract but work exclusively to the same contractor they will consider you an employee, I just went through this last year. You either need to contract directly or work for other contractors every once
and a while

Not true

 

[KawisakiRider]

How so?

Not true

 

[sweld]

How so?

I was with my previous company 10yrs as a sub, and this company 6yrs. I am currently being audited, they did question whether I was a sub or employee. I have no written contract nor do I work for anyone else. I had to answer about a 1/2hr worth of questions, who pays your taxes, gst, ins, tool, etc. gone through this twice now

 

[storm1972]

I was with my previous company 10yrs as a sub, and this company 6yrs. I am currently being audited, they did question whether I was a sub or employee. I have no written contract nor do I work for anyone else. I had to answer about a 1/2hr worth of questions, who pays your taxes, gst, ins, tool, etc. gone through this twice now

Havent been audited myself, but its exactly what sweld stated above. i pay my own taxes, gst, tools ect, the guy i have working with me, is responsible for his own taxes, gst, ect, i carry the company liability to the tune of 2million, and wcb coverage as I am a General contractor, and he is considered a sub, its more for personal protection then anything else. say he falls off a ladder and hurts his back, with him covered under my wcb he can therefore not sue me.