What are the benefits of incorporation and when should a business incorporate? Incorporated businesses offer a number of major benefits but a big one is tax deferral. In Kelowna there are a number of small businesses operating under various structures and it really depends on the specific business. A designated tax specialist should be sought before making any final decisions.
Using a corporation provides tremendous tax deferral opportunities as the tax rate on the first $400,000 of active business income in a corporation is just 16.5% (2008 – BC). It is precisely this smaller business rate that’s crucial to the viability of incorporation, especially when it is compared to the top personal rates in BC – 43.7%.
Remember, tax deferral exists only as long as the owners are able to leave some money in the corporation. When they pay themselves a dividend, there’s a second layer of tax, which brings the total up to roughly the top marginal rate in each province. So if a business owner uses up all their cash flow for personal living expenses, the benefit of incorporation is reduced if not eliminated. For more benefits of Incorporation logon to www.serviss.ca.
Professional tax and legal advice should always be sought before entertaining any business changes. Incorporation can be a complicated process and is not for every business owner.
I would recommend the following tax specialist firms for Kelowna business owners:
Grant Thornton - Kelowna
Meyers Norris Penny - Kelowna
KPMG - Kelowna
Andrew Tse CA - Kelowna
Adams Heymen Owen - Kelowna
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