Limited versus Propreitor

[storm1972]

Anyway, this thread is kind of going in a different direction with all the what ifs and so on with wcb and wether your an employee or sub contract labourer, Ive gone out and made an appointment with a different accountant, to get another professional opinion, regarding the whole ltd vs. sole proprietorship deal, hopefully they can explain it in english so the average person can understand it better. My general consensus from all that posted is that ltd has its options mostly liability , but i already have company liability insurance , I am however interested in this dividend and income splitting thing, and if that is a viable solution to what seems like a circle i cant get out of.

 

[Cyle]

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

I did work for another company last year actually, it was my brothers but they do not know that it's his, and it's none of their business. Problem to I see with a company is, I don't want to fool around with GST and stuff so I need to keep it under $30k so it wouldn't solve my entire issue.

As said below, it doesn't matter if it's just one company. What about trades if they ONLY work for one builder, there is no way they couldn't be viewed as a contractor. It is my choice to only work for one person most of the time, but it could change at anytime. WCB etc is useless when already covered.

Anyway, me and my dad figured it out for last night and I won't pay anymore taxes even though what CRA did. The paid for mileage thing helps a lot, and is completely legit.

 

[Cyle]

Anyway, this thread is kind of going in a different direction with all the what ifs and so on with wcb and wether your an employee or sub contract labourer, Ive gone out and made an appointment with a different accountant, to get another professional opinion, regarding the whole ltd vs. sole proprietorship deal, hopefully they can explain it in english so the average person can understand it better. My general consensus from all that posted is that ltd has its options mostly liability , but i already have company liability insurance , I am however interested in this dividend and income splitting thing, and if that is a viable solution to what seems like a circle i cant get out of.

Sorry about that, didn't mean to de-rail it.

I'd think though limited would be nice as no person liability if things go wrong, insurance doesn't cover everything.

But as your doing, your best bet is to speak to an expert about it. I'd talk to atleast two though to make sure they say the same thing. As I said before my accountant, who is an actual chartered accountant screwed up my taxes badly......

 

[CATPRIDE]

Lets get back on track..........STORM started a great thread and was very good thread up until...........well you know the rest of the story...........People keep the information coming in

 

[storm1972]

Lets get back on track..........STORM started a great thread and was very good thread up until...........well you know the rest of the story...........People keep the information coming in

Thanks Cat, lots of good info in this thread that has been helpful, going to see what a certified accountant has to say, and then possibly a financial adviser , the way I see it there is no real solution to the existing issue without increasing income levels , and therefore being taxed to death lol

 

[CATPRIDE]

Thanks Cat, lots of good info in this thread that has been helpful, going to see what a certified accountant has to say, and then possibly a financial adviser , the way I see it there is no real solution to the existing issue without increasing income levels , and therefore being taxed to death lol

When I first seen the post I thought great as I myself is in a position currently to start up a small business. I found most poasts very helpful and hope the information still continues to flow in.

 

[hevy_chevy67]

Any other questions you guys have? I'm not a CA yet, but I can try and help haha.

 

[storm1972]

Any other questions you guys have? I'm not a CA yet, but I can try and help haha.

not as of yet chevy, meeting with an accountant to have them review my books ect, and see if its even worth my while, something tells me its not going to really benefit me, but who knows

 

[cokecrazed007]

I've been a Ltd company since 2002 and it has been great. My wife and I income split and we stay in the lowest tax bracket and the rest we collect in dividends. We don't pay ourselves a set amount every month, we just take what we need and let the accountant figure it out at tax time. We write off legit stuff and pay personal for other stuff. Our taxes are quite low. If you need a good accountant pm me and I will give you his number. He comes to my place, during hours that work for me, he does my books, and charges me a yearly fee up front and they will look after me all year for no extra money( even if I get audited) he is worth the money. He will also give me info on what to write off and what not.

 

[hevy_chevy67]

A few pages ago I made a post about 'Integration' and how it ensures that the end of amount of tax paid is regardless - whether the income is earned personally or through a corporation. I've done a better example to show how it works.

The model has a few assumptions however:

1) That any income earned by an individual outside of a corporation is taxed at the highest bracket (39%)
2) All income that earned and taken out through a corporation is removed by via a dividend

Income earned though corp
Corporate income			1,000.00
Corporate tax (14%)			140.00
After tax cash (in corp)			860.00
Dividend to individual			860.00
Personal tax on dividend (27.71%)		238.31
Take home cash			621.69
Income earned personally
Personal income			1,000.00
Personal rate (39%)			390.00
Take home cash			610.00
Benefit of incorporation			1.20%

In this case, there is a small benefit of running income through a corporation. The model isn't perfect, but this is the CRA's intent with it.

 

[IG650]

Interesting in this example, what would have the been the diffferances in Accounting, Incorporation and other costs that would be incurred with the 2 differant Status's?

Thanks.

A few pages ago I made a post about 'Integration' and how it ensures that the end of amount of tax paid is regardless - whether the income is earned personally or through a corporation. I've done a better example to show how it works.

The model has a few assumptions however:

1) That any income earned by an individual outside of a corporation is taxed at the highest bracket (39%)
2) All income that earned and taken out through a corporation is removed by via a dividend

Income earned though corp
Corporate income			1,000.00
Corporate tax (14%)			140.00
After tax cash (in corp)			860.00
Dividend to individual			860.00
Personal tax on dividend (27.71%)		238.31
Take home cash			621.69
Income earned personally
Personal income			1,000.00
Personal rate (39%)			390.00
Take home cash			610.00
Benefit of incorporation			1.20%

In this case, there is a small benefit of running income through a corporation. The model isn't perfect, but this is the CRA's intent with it.

 

[hevy_chevy67]

Interesting in this example, what would have the been the diffferances in Accounting, Incorporation and other costs that would be incurred with the 2 differant Status's?

Thanks.

Not sure I follow - could you explain?

 

[IG650]

The way it was explained to me, was that going from Sole Prop. to limited or Incorporated required different acccounting Practices to meet the requirements of the Feds. So the related accounting costs where significantly higher, not worth it for me as I'm 97% service.

Just that in the example the differance is not really significant, but there are extra costs involved that may skew the returns.

Obviously this is all very general. Thanks for yours and others contributions. Its a pretty informative thread:d

 

[storm1972]

The way it was explained to me, was that going from Sole Prop. to limited or Incorporated required different acccounting Practices to meet the requirements of the Feds. So the related accounting costs where significantly higher, not worth it for me as I'm 97% service.

Just that in the example the differance is not really significant, but there are extra costs involved that may skew the returns.

Obviously this is all very general. Thanks for yours and others contributions. Its a pretty informative thread:d

This is true, the costs of filing a corporate return versus a personal return are allot higher. And as far as the dividends go, i have been told this can be done once a year . Income splitting with your spouse is viable if they are doing something with the company, ie. bookeeping, getting materiels ordered and picked up things like that from what ive been told, but again this is second hand info from my bookeeper.

 

[hevy_chevy67]

This is true, the costs of filing a corporate return versus a personal return are allot higher. And as far as the dividends go, i have been told this can be done once a year . Income splitting with your spouse is viable if they are doing something with the company, ie. bookeeping, getting materiels ordered and picked up things like that from what ive been told, but again this is second hand info from my bookeeper.

With dividends, you can draw out as much cash as you want, when you want. At the end of the tax year, your total draws are totalled up and that is what will be called your dividend.

 

[storm1972]

With dividends, you can draw out as much cash as you want, when you want. At the end of the tax year, your total draws are totalled up and that is what will be called your dividend.

Learned something new thanks, bookeeper told me i can do it once at years end..

 

[CATPRIDE]

Learned something new thanks, bookeeper told me i can do it once at years end..

might need new bookie.......JS

 

[CATPRIDE]

Just want to bring this TTT..........just to see if anyone has anymore input..........

 

[kbrunlees]

All your wife has to be is a director of the company. All legal and proper. whereas a friend would have to buy into the company to be a director then it gets really complicated.