Corporate tax

You want to start a business or bring it to the next level, but you don’t know how to go about it? Incorporating could be an interesting option, as long as it is well planned.

T2inc wants to help you get the answer to your questions. In order to help you understand the subject, our professionals explain why it is interesting to incorporate your company.

Why you should incorporate your business from a legal point of view ?

To start with, our tax and accounting experts believe that the first reason why people decide to incorporate their business is for the legal aspect. Many entrepreneurs forget that it’s risky to start a company. Indeed, it’s not because the business activity is not at risk that it won’t come later. Unfortunately, we cannot predict everything in life. Some events can suddenly appear, and we have no control over them.

Legal protection 

The legal advantage of incorporating is that it offers a certain legal protection. A business corporation removes any responsibility as an individual from any legal event that could occur. Your incorporated company becomes a moral entity.

In simpler words, with an incorporated company: it’s not you, it’s a whole other ‘’person’’. So if your company is being sued, it won’t be you personally who will be sued, but your company. If the business goes bankrupt, it’s not you who goes bankrupt, but the joint stock company.

The importance of questioning yourself

You should ask yourself this question: Am I a 100% sure that the risks taken with the business activities I want to do are very little? If that doesn’t stress you out and you truly believe that the risks are slim, you can go to the next step. You’ll see if the tax benefits are interesting to help you make a decision on whether to incorporate or not.

The benefits of incorporating from a tax point of view

First of all, it is important to know that the main advantage of incorporating your company is to have the possibility to postpone your tax. Basically, this consists in personally using your business profits later.

For example, the corporate tax rate in Quebec is generally between 15% and 20%, while being between 27% and 53% for a self-employed. Let’s analyze a concrete example.

An entrepreneur pays 20% in business tax and 40% in personal tax. If he earns $60,000 and he needs $40,000 to live, he has $20,000 left, which he doesn’t need right now. If he is incorporated, he will only need to pay 20% ($4,000) and he will have $16,000 left in his company’s. He can use it as he wishes.

On the other hand, if he’s self-employed, he will have to pay 40% ($8,000). After 30 years, the difference can be enormous and the investment lost is considerable.

Faire affaire avec des professionnels pour incorporer son entreprise 

For T2inc, the legal and tax aspects are the two elements to be analyzed when deciding whether or not you want to incorporate your business activity.

Naturally, there are many more advantages of incorporating. If you want to know more about the subject, or if you want an in-depth analysis of your situation, contact us. T2inc is committed to the success of your business project.

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