Phil Hogan is a Canadian and US CPA working with clients throughout Canada and the US. Phil advises on cross border tax and financial planning matters. Phil can be reached at phil@beaconhillwm.ca or via telephone at 778.433.1314. You can also read more about Phil at www.Beaconhillwm.ca/team/about-phil/
Should I incorporate my BC company?
01 February 11 
Canadian Tax Q&A Question
Hi
I run a successful online marketing business in Vancouver that I have been involved with since 2002. I’m getting a lot of conflicting advice on whether or not I should incorporate by business. Let me give you some facts and perhaps you can point me in the right direction:
- I make about $190,000 gross and $130,000 net per year
- I work from home
- No employees, but lots of sub contractors (online help)
- I’m married with 2 children under 18 years old
- My wife have $20,000 in income per year
- I make $15,000 from a teaching pension in addition to the income above.
My number is XXX-XXXX if you want to talk over the phone.
Thanks for your time.
Regards,
XXXXXXX
Answer
Dear XXXX
I get this question all the time and in each case it will depend on a specific set of facts. However let me do my best to give you a quick answer and if you have any other questions please give me a ring at 250-661-9417.
From a tax perspective it appears as though you may benefit from incorporating your business if you feel as though you can keep some earnings in the corporation year over year to help the business grow.
If you don’t need the full $130,000 per year for living expenses there can be a significant deferral of tax by leaving accumulated earnings in the corporation to grow at lower tax rates. Also consider that by incorporating you’ll have the ability to split some income with your wife if you planned on issuing her shares of the newly incorporated company.
If you ever decided to sell the shares of the corporation you would be able to shelter a significant portion ($750,000) of the capital gain providing that you met a specific set of prerequisite criteria.
Note however that if were to incorporate you would incur additional annual legal, accounting and tax preparation costs.
Those are some of the more significant considerations.
Give me a call at 250-661-9417 and we can discuss your situation in more detail.
Regards
Phil
Phil Hogan, CA
250-661-9417
This commentary reflects the personal opinions, viewpoints and analyses of the Beacon Hill Wealth Management Ltd. partner providing such comments, and should not be regarded as a description of advisory services provided by Beacon Hill Wealth Management Ltd. or performance returns of any Beacon Hill Wealth Management Ltd. client. The views reflected in the commentary are subject to change at any time without notice. Nothing in this commentary constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Beacon Hill Wealth Management Ltd. manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results. Any discussion about taxation is for educational purposes only and should not be viewed as professional advice. Consult your tax professional for tax advice on your particular situation.
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