Q: I left my "safe" job to offer my services as a project consultant to various firms. I have been very successful and have established a relationship with several large clients. Are there any criteria on which I can judge if incorporating is right for me?
A: A tough decision that every successful businessperson must make at one point or another.
A non-incorporated business reports all income on the personal tax return and is taxed at the marginal tax rate. A successful individual would be taxed at about 46 per cent. At this rate, almost half of your earnings will go to Prime Minister Stephen Harper and his crew. Compared to the small business corporate tax rate of 16.5 per cent (combined) for income up to $400,000. Need I say more?
A primary tax question that successful sole proprietors should ask themselves in determining if they should incorporate "Do I need all my earnings to support my personal lifestyle?" If your answer is "Yes" you may not be ready to incorporate. On the other hand, if your answer is "No" then it may be time. Speak to your accountant and lawyer and get the entire picture.
Henry Choo Chong, CGA provides professional accounting and taxation solutions for individuals, businesses and corporations. Henry can be reached at 416-590-1728, ext. 304. E-mail all questions to Money Matters: