Everyone wants to pay as little in taxes as possible. There’s good news if you have an incorporated business, as there are many avenues for you to explore.
Tax structuring simply minimizes your yearly payments by channeling a portion of your income through your incorporated entity, thereby lowering your personal tax rate.
This has the effect that you are taxed separately from your entity, each in its own lower rate.
You might have a rental property that generates income. If this income was to apply to you personally it would most certainly increase your personal tax rate. Diverting this income to your entity has the effect that it is taxed separately and most probably at a lower rate.
There are various secondary tax benefits available, too, including bringing family members into your tax planning.
As shareholders, for example, you can direct income to them, which may well be taxed at the lower rate.
Be sure to ask your tax professionals about deferring your entity’s tax payment to a later date. This technique has many intricate details attached to it, which must not be attempted on your own.
Incorporated entities can also accommodate various deductions that benefit you and your family.
You could deduct health premiums and even pay salaries to family members under certain circumstances.
Again, consult your advisors to ensure you remain within the intention of the act and receive the tax benefit you planned for.
Keep in mind that different-sized companies are taxed at different rates. You can strategically plan for limiting the size of your incorporated entity at tax time and effectively reducing your tax.
Remember that the company directors control it and make decisions by way of resolution.
This is important, as they will be making strategic and tax planning decisions. Companies should have Errors and Omissions Insurance for their directors.
Be absolutely sure that company tax planning adheres to all the rules relating to tax. It is just not worth it to save some money illegally and end up paying big fines and possibly even being exposed to criminal charges.
Incorporating a company has many tax benefits. However, remember that the primary goal with incorporation is to protect your assets. In our next article, we will be discussing the various choices you face when incorporating a company at the provincial or federal level.
. First in the series is online at www.mrtimes.com
John Becker has run his own law firm in Pitt Meadows for more than 30 years, focusing his practice on corporate commercial real estate and business succession planning. Send questions to: email@example.com