Presently a sole proprietor? Working in partnership or as an employee? If so, there are many reasons to consider incorporating your small business. Want to know the benefits of incorporating? Let's examine what they are!
1. Reduce Your Taxes Significantly
By leaving income in your corporation, you can significantly reduce your overall income taxes. You'll be taxed at approximately 20%, and you'll avoid the highest personal income tax rate of 40%-50%.
2. Build A Big Corporate Retirement Fund
With a corporate income tax rate of approximately 15.5%, you can easily retain income in your company. Use your company as a strategy, and accumulate a significant retirement investment portfolio.
3. Get A Tax Free Loan
Want to buy a home, automobile or even a yacht? You might eligible to borrow money from your company and declare the loan as personal income.
4. Receive Tax Free Retirement Dividends
Upon retirement, or sabbatical from work, you and your spouse can each receive dividends of approximately $30,000 from your company. If you have no other personal income, the total is up to $60,000 of dividend income which can be received as personal income tax free.
5. Smooth Income
Reduce your overall income taxes if your IT contracting or consulting income fluctuates from one year to the next and use your company to smooth out your personal income.
6. Protect Personal Assets
Protect your personal assets by virtue of your company providing you with limited liability from your corporate IT contracting work.
7. Increase Your Marketability
With an increase in tax audit risk from the CRA, many large customers and IT staffing agencies now prefer to deal with incorporated IT contractors rather than sole proprietor IT contractors.
8. Additional Tax/Financial Strategies Available
With additional tax and financial planning strategies available for your use, you can create individual pension.