Incorporating is easy to do and easy to do badly. The registration itself takes a morning; what matters is whether it is the right move for your income and your plans, and whether the accounts, the year end and the bookkeeping behind it are set up so the saving is real.
We will give you a straight answer on whether it is worth it, including when it is not.
What this includes
- A plain answer on whether incorporating helps you this year
- Choosing a fiscal year end deliberately rather than by default
- Setting up the CRA program accounts you need and none that you do not
- Payroll and HST registration where they apply
- Getting bookkeeping started properly from day one instead of rebuilt at the year end
- What changes about how you pay yourself, before it has to be decided
When incorporating is not the answer
If you are drawing everything you earn to live on, the deferral that makes incorporation worthwhile has nothing to work with, and you have added a corporate return, filings and annual costs for very little. There is a level of retained income where it starts to pay, and it is worth finding out where you are relative to it before you file anything.
The year end is a decision
A corporation can choose its fiscal year end, and most people take 31 December without thinking about it. A different date can smooth a seasonal business, move a first-year tax bill, or simply put the year-end work somewhere less busy.
Afterwards
Incorporating creates obligations that run every year: a T2 return, financial statements, possibly payroll and HST. Knowing that at the start is part of deciding.
Questions we are asked about this
At what income does incorporating make sense?
There is no single figure, because it depends on how much of the income you need to live on. The benefit comes from deferring tax on money left in the company; if you draw it all out, there is little to defer. The calculation is worth doing with your actual numbers.
Can I choose my corporation's year end?
Yes. A corporation sets its own fiscal year end, which does not have to be 31 December. It is worth choosing deliberately — for a seasonal business or a first partial year, the right date can make a material difference.
Do I need a lawyer to incorporate?
Not always, but it is worth one where there will be more than one shareholder, where shares are being issued in different classes, or where a shareholders' agreement is needed. We will tell you when the question is a legal one rather than an accounting one.
Worth reading
Where we work
We are based in Scarborough and act for clients across Toronto and the GTA in person — see accountant in Scarborough and small business accountant in Toronto — and everywhere else in Canada by email and video call.
Our other services
Corporate Tax Returns (T2) · Personal Tax Returns (T1) · Trust Returns (T3) · HST and GST Filing · Bookkeeping · Payroll · CRA Audits and Disputes · Financial Statements · Tax Planning · Estate and Succession Planning · Cross-Border Tax
Our office
ClearWealth Accounting Advisors
1457 McCowan Rd, Suite 202
Toronto, Ontario M1S 5K7
Get directions
Open Monday to Friday, 9 a.m. to 6 p.m.
Phone: (437) 290-5117
Email: info@clearwealth.tax
