Incorporating & Accountants

[schocker]

Currently, I am working as a sole proprietor. I do have a GST/Business number set up for this, but I know that incorporating would make more sense money wise. With regards to incorporating, which would be the best route.

-Buy one of those kits at the registry and fill it all in?
-I saw Lawdepot.ca Can set everything up for you for $99 online?
-Meet with an accountant and get them to create my forms and go to the registry with those?

I know I would easily be able to do the gst number and such again online or possibly transfer my current number on my own.

Also, I would likely need to get an accountant for book keeping purposes. Does anyone have any good ideas for someone in the NW as I am over in Sage Hill?

Thanks :)

[dannie]

Cheapest way out of those is to get the Legal Ease Kit at the Registry and incorporate yourself. Unless you are doing something complicated (ie: professional corp, publicly traded corp etc), those kits are a great basic coverall.

The lawdepot thing is just the paperwork that you see in the Legal Ease Kits at the registry. You will still have to incorporate the company

[schocker]

Gotcha. Thought law depot incorporated for you whoops. Would you say the more expensive of the kits is worth it?
I know the basic is the papers, the middle one comes with the minutes binder and the papers, and the top kit for $65 is the binder with all the papers organized within the proper areas of the binder

[dannie]

The difference between the $40 kit and the $65 is that the expensive one contains the binder. By law, you are required to maintain something called a minute book. This book contains your list of directors, shareholders, agreements, share certificates etc. That book has to be kept up and accessible to the public and is called a Minute Book. If you dont want to go to the hassle of setting that binder up yourself, get the $65 kit. If you have the time to do it yourself, buy the $40 one

[Mibz]

I did it all in a couple hours with forums downloaded from the CRA website. Only money I paid was the actual Incorporation Fee.

EDIT: And the NUANS search, which took about 5 minutes online.

[schocker]

Alright thanks guys. I will see if I can tackle the forms I found here:
http://www.servicealberta.gov.ab.ca/1041.cfm#AlbertabasedIncorporationRequirements
otherwise I can try the kit with the binder for the minutes book.

[msommers]

What are you doing for a business? How long are you planning on doing this for? Do you know what a PSB is? Keep in mind that along with the initial startup fee of incorporating, accountants charge significantly more for incorporated businesses than SP's. Not trying to deter you away because incorporated businesses have their benefits but weigh all the options with your long-term goals before doing anything.

[dannie]

Nooooo.... those arent what you need. That link is for cooperative and extra provincial registration.

Heres the three forms you need:

http://www.shawnessyregistry.com/forms/REG3047.pdf
http://www.shawnessyregistry.com/forms/REG3016.pdf
http://www.shawnessyregistry.com/forms/REG3017.pdf

If you are doing a named corporation, you need to do a Nuans search as well. You can do it at the registry as well. No form needed

[schocker]

Originally posted by msommers
What are you doing for a business? How long are you planning on doing this for? Do you know what a PSB is? Keep in mind that along with the initial startup fee of incorporating, accountants charge significantly more for incorporated businesses than SP's. Not trying to deter you away because incorporated businesses have their benefits but weigh all the options with your long-term goals before doing anything.
I am a technologist working as an oil and gas contractor and should be for many years. I am not sure what a PSB is though. (Edit, I do know what it is now that I looked it up, couldn't place the acronym. Might be considered PSB in which it wouldn't be beneficial if CRA was to crack down but I am guessing there are hordes of people working that way in Calgary?) I am assuming the accountant would be about $1200-1500 as my father is a construction contractor and uses one but he is not taking new clients. I know I would like to do this for the tax benefits though with regards to dividends and the lower corporate tax compared to personal tax levels.


Originally posted by dannie
Nooooo.... those arent what you need. That link is for cooperative and extra provincial registration.

Heres the three forms you need:

http://www.shawnessyregistry.com/forms/REG3047.pdf
http://www.shawnessyregistry.com/forms/REG3016.pdf
http://www.shawnessyregistry.com/forms/REG3017.pdf

If you are doing a named corporation, you need to do a Nuans search as well. You can do it at the registry as well. No form needed
Lol thanks dannie, I read them wrong. Could have sworn I found ones that weren't cooperative. I will be doing a numbered most likely though as I cannot think of a good name

:rofl:

[JfuckinC]

Originally posted by schocker

I am a technologist working as an oil and gas contractor and should be for many years. I am not sure what a PSB is though. I am assuming the accountant would be about $1200-1500 as my father is a construction contractor and uses one but he is not taking new clients. I know I would like to do this for the tax benefits though with regards to dividends and the lower corporate tax compared to personal tax levels.


Lol thanks dannie, I read them wrong. Could have sworn I found ones that weren't cooperative. I will be doing a numbered most likely though as I cannot think of a good name

:rofl:

Beyond Naming Contest?!

:poosie:

[Mibz]

I have a pretty uncreative name myself, haha.

[skandalouz_08]

If you want a small business accountant call up Jeff Kong - 403-890-8203. He's taking new clients and tell him Des sent you.

[schocker]

Well I was thinking like Schock Technology Ltd. but since it is a weird spelling compared to Shock I figured people would have a tough time with it. It does have a better ring though than 654984984894 Alberta Ltd.

I suppose it would be worth getting the kit though to understand everything as I don't understand some of the items like shares but I will be the sole employee and director.

[Mibz]

Scock Tech? Do you provide a more comfortable sock for whackin' it? I'd invest.

[Jlude]

Originally posted by Mibz
Scock Tech? Do you provide a more comfortable sock for whackin' it? I'd invest.

:rofl:

[JfuckinC]

Whats the line of work?

[CapnCrunch]

[i]accountants charge significantly more for incorporated businesses than SP's. [/B]

What do you consider significant?

[schocker]

Originally posted by Mibz
Scock Tech? Do you provide a more comfortable sock for whackin' it? I'd invest.
Oh I don't know if that would be quite professional Mibz :rofl:


Originally posted by JfuckinC
Whats the line of work?
oil and gas project technologist services

[msommers]

Originally posted by CapnCrunch


What do you consider significant?

200 vs. 1500+

[Red@8]

I can suggest Ladha, Moen and associates for an accountant. Ask for Mariam or Jason. They are in Panorama Hills. 403.284.9671

[C_Dave45]

I would like to hear from an actual accountant as to the benefits of going LTD over SP.

My accountant (who has a fairly large firm and is a CA) still says I don't need to go LTD yet.

Basically here is what he's told me:


Still the same write-offs, tax benefits.
Year-end costs for LTD company is around $1500-2,000.
Unless you're making more money than you are paying yourself, there is no benefit of incorporating.
A LTD company protects any personal assets if you go bankrupt. (If that's your plan ;) )


As a Sole Proprietor business I can write off


All business expenses (materials, tools, etc)
Vehicle expenses (repairs, fuel, lease, capital cost allowance)
25% of my home costs (mortgage interest, heating, security, office supplies)


So, unless you're making $200,000+ and only need to live on a $75,000 wage, there is no benefit to incorporating.

[msommers]

*I'm not an acct, just trying to remember what mine told me a few months back.

There is another benefit to incorporating - you get a different tax rate for the amount you pay yourself in dividends and keep in the company

Salary - just like any other pay cheque. Depending on the amount you make per year and which tax bracket you fall into. You pay CPP, capped at $4500/yr or 9.9%. This is all you do for SP's.

Dividends - money that stays in the company is taxed at 14%. This is the big thing. You can work the tax brackets in your favour and pull out money later (years) instead of getting it all in one sum. So instead of making...200K/yr at 39%, you can pay yourself whatever you want in salary and have the remainder taxed at 14%. When you pull that money out into your personal account, it is then "salary." So some people invest the money in their company and use that as a retirement fund.

I think there are some food write-offs with incorporating as well but they're minimal.

Normally I would have been advised to become incorporated because depending on the situation, you can have family members as shareholders and do some other workarounds I don't fully understand. But because of my situation, I could be classified as a personal service business (PSB). The Alberta government changed a bunch of rules this year and if you're incorporated and they audit you, and fall into the PSB category, you get taxed at nearly 50%! Apparently the big reason for this motion to be passed was O&G contractors incorporating and not having to paying their CPP.

Like I said, I'm not an accountant and I'm trying to recall what she told me, but she knows her shit and would have made a lot more money having me incorporate than not. Not only that, she works for a large firm and deals with a lot more complicated clients than myself so I trust her.

As an aside, once you have your business number, you have to start charging GST. Last year I had a late start and was under training for awhile and made <30K/yr. I was told that because of that, I didn't need to charge GST (not from my current acct). That's fine if you don't have a business number but if you do, charge it right away. I learned the hard way from this "advise" and had to pay the GST I should have charged. It was mitigated by some school credits and write-offs a bit but still sucked!

[C_Dave45]

Originally posted by msommers
*I'm not an acct, just trying to remember what mine told me a few months back.

There is another benefit to incorporating - you get a different tax rate for the amount you pay yourself in dividends and keep in the company


Correct. This is why, unless you're making much more than what you need to live on, there's not much advantage.

If you need a 75k annual salary, and your business is making 75K...it's all "personal income".
If your company is making a quarter of a mil, then that extra 175k can be taxed at a lower rate if you're incorporated.

But for probably 99% of "self-employed, home based business", you're business income is pretty much the same as your personal income requirements, negating the benefits of incorporating.

[CapnCrunch]

Originally posted by C_Dave45


Correct. This is why, unless you're making much more than what you need to live on, there's not much advantage.

If you need a 75k annual salary, and your business is making 75K...it's all &quot;personal income&quot;.


My company pays half my wage as a large dividend.

So in theory, you'd only pay income tax on $32,500.

(eg. I pay around 18% tax on what my company brings in. This covers corporate and personal taxes. The rest goes into my pocket for whatever I want to spend it on.)

another

(eg. My wife switched her business from a sole prop and incorporated last year, the direct result was $25,000 right into her pocket.)

Cliffs: your accountant sucks.

[C_Dave45]

Originally posted by CapnCrunch



Cliffs: your accountant sucks.
Yes because clearly all the facts and intracacies of all 3 business have been laid out in front of a CA.

CLIFFS: Id rather listen to a CA than some fuckin knob on an Internet forum who knows basically dick about the facts involved.

OP: clearly You should follow CaPnCrunch's advice as he obviously knows more than any CA.

[schocker]

Well I know the main benefit of this is you can pay yourself what you need and keep the rest in the company at the lower tax rate. That combined with the dividend non-taxed amount paying only corporate tax on that ~$30k amount is the main reason I had been looking into this as it makes financial sense.

[msommers]

Originally posted by schocker
the dividend non-taxed amount paying only corporate tax on that ~$30k amount

I don't understand this.

[schocker]

Originally posted by msommers


I don't understand this.
I believe it is the first $30k of dividends are tax exempt, so on that amount, your company would only pay corporate tax at what ever it is like 15%? So with the personal exemption of like $7k you would be saving paying personal tax on that additional $23k

[CapnCrunch]

Originally posted by C_Dave45

Yes because clearly all the facts and intracacies of all 3 business have been laid out in front of a CA.

CLIFFS: Id rather listen to a CA than some fuckin knob on an Internet forum who knows basically dick about the facts involved.

OP: clearly You should follow CaPnCrunch's advice as he obviously knows more than any CA.

It's not my advice, but that of my accountant.

You seem offended, my apologies. Please don't take it as an insult towards you. We're all here to share ideas and experiences.

If you pay less than 18% on your income, please share. I'd love to pay less than that.

[CapnCrunch]

I should add that I'm in the top tax bracket of income, maybe that's why our accountants are of differing opinions.

[JfuckinC]

I'm Inc, have been since i was 17. My accountant suggested it. Just switched accountants and he said it was good too. Pay dividends as well.

I make wayyyyyyy more then i pay myself though so :dunno:

[msommers]

Originally posted by schocker

I believe it is the first $30k of dividends are tax exempt, so on that amount, your company would only pay corporate tax at what ever it is like 15%? So with the personal exemption of like $7k you would be saving paying personal tax on that additional $23k

Didn't know that, thx.

From the way I understand it, there are separate accounts. You still have to pay personal income tax on it eventually, otherwise it will always be in the company. Now, I don't know the implications or if it's totally fine (doubt it) but say you make 200K and pay yourself 50K for the year. Just because 150K is still in the company getting taxed at 14% doesn't mean you can use it to go on a vacation.

Like I said, you will be pull it out eventually and get taxed on it from a personal standpoint. For now you're mitigating the tax damage and working your personal income tax brackets in your favour. From the way I understand it, it's a delay in paying personal tax (over the long run with smart choices, much less tax), not avoiding it. That's why I asked the length you intend on doing this and what you do, because if you only have one client, you might be considered a PSB and get f'ed in the rear. For me, I don't plan on doing this more than a few years so I don't really care.

[Mibz]

Originally posted by msommers
Just because 150K is still in the company getting taxed at 14% doesn't mean you can use it to go on a vacation. Unless you can figure out a way to make it a business trip ;)


From the way I understand it, it's a delay in paying personal tax (over the long run with smart choices, much less tax), not avoiding it. Yeah. If you do what was mentioned and just withdraw smaller amounts after retirement then you're going to pay less tax than if you withdraw it all at once, or on top of other personal income. But you're going to pay personal tax on that money one way or another.

I think.

[ExtraSlow]

Bumping old thread as I'm about to incorporate a business.

What's worrying me right now is that the business name I would like to use (and have secured the website for), is two pretty common words. I haven't found a business anywhere that uses this name.
Aside from the NUANS search at the registry, is there any more research I can do ahead of time on the name?

Not planning to release the name until this business is up and running, please don't ask.

[nzwasp]

Are there any calculators to figure out how much tax I would pay (with dividends) as a contractor. Im tossing up between either going on EI for 50 weeks or contract for 4 months which knocks EI out of the running all together and then needing to find another contract in 4 months time.

[ExtraSlow]

Don't think you'd get 50 weeks. Also, factor into this that you would be paying tax on the EI amounts as well.

[nzwasp]

To be honest my situation is a bit different.

I get 15 weeks of parental leave first then 35 weeks of EI.

When I was last on parental leave 18 months ago I got $850 biweekly or something like that.

So based on that 25 payments of $850 for EI = 21050

Contract is $60 an hour for 4 months (16 weeks)

So $38400 however I have no idea how much tax I would pay on that.

Since my wife works I was thinking of keeping the whole amount in the company and then just taking out the bare minimum probably $500 a week to survive on if I need to.

[suntan]

Sorry, can't answer your question, but in regards to incorporating, the Harper regime closed virtually every loophole there was so there's not nearly the advantages there were before.

[nzwasp]

I thought harper was all about protecting business interests.

[stillworking]

Originally posted by ExtraSlow
What's worrying me right now is that the business name I would like to use (and have secured the website for), is two pretty common words. I haven't found a business anywhere that uses this name.
Aside from the NUANS search at the registry, is there any more research I can do ahead of time on the name?


http://www.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs04210.html

With the real time nuans system you can check potential names across Canada for free. Put in your email and then input the key. You can look at as many names as you like.

Then pay your twenty dollars for the report and click thru to do a CBCA pre approval thru to see what they say. You will probably hear back on Monday.

You will know what's up with your name then as it's harder to get a federal registration.

Excerpt from my last try....

The proposed corporate name is not available because it appears to be confusing with the trade names, trade marks or official marks identified on the attached search report, this potential confusion may be that the distinctive part of the proposed corporate name is identical or very similar in appearance or sound with existing names shown on the NUANS® report.
However, you may be able to provide information which would enable us to change this decision. Please explain why, due to differences of wares, services, clientele, territory or length of time the proposed corporate name has been in use there is no likelihood of confusion with existing business names, trade-marks or official marks identified on the NUANS® search report.

The proposed corporate name does not appear to be available because the use of the word "GROUP" connotes an umbrella corporation. If the new corporation is related with businesses appearing on the search report and will form part of the group it will be necessary to provide us with written consents from these affiliated businesses or from the parent company consenting on their behalf. (Include list of its affiliates.)
If the proposed corporate name is not related with businesses appearing on the search report, you may be able to provide information which would enable us to change this decision. Please explain, why, due to differences of wares, services, clientele, territory or length of time the proposed corporate name has been in use there is no likelihood of confusion with existing business names, trade-marks or official marks identified on the attached NUANS® report.

[ricosuave]

some great info here, thanks all

[Sugarphreak]

....

[CompletelyNumb]

Originally posted by ExtraSlow
Not planning to release the name until this business is up and running, please don't ask.

I don't care about the name, I am curious the sector though. Aren't you an O&G lifer? Just curious because i know about a dozen O&G guys (myself included) all starting new businesses completely unrelated to our industries. Kinda funny how we're all scrambling.

[ExtraSlow]

Mine is still O&G related.

[suntan]

Dividend markup rates are much higher now. It's basically six of one, half dozen of the other now.

All the loopholes with young children are gone, so now your kids have to be much older before you can do anything with that.

Small business tax deduction is still there but really it's not THAT much saved.

They also have no leniency on paying GST, payroll and income tax anymore. They used to give you some grace but if you're short they will fee you tons.

[suntan]

.

[Sugarphreak]

...

[suntan]

Yeah that one's nice to have. Not sure I'd call that a loophole though.

[UndrgroundRider]

Originally posted by Sugarphreak
^^There is a lot of little things you can do. Such as simple GST

I charge 5% on top of my invoices.. but I only remit ~3.6%. Thus I make 1.4% more money over my standard charge out rate :D

Explain.

[Sugarphreak]

...

[UndrgroundRider]

Originally posted by Sugarphreak


Instead of working everything out, you can just remit a percentage of what you collect

http://www.cra-arc.gc.ca/E/pub/gp/rc4058/rc4058-03-13e.pdf




Right, but certainly you have other ITC's that amount to that 1.4%. (Otherwise you're probably doing a bad job of claiming all of your deductions in the first place.)

[msommers]

Yeah I think if you make below $30K/yr you don't have to charge GST but honestly I don't know you wouldn't for that very reason.

Good info about incorporating though. For what I was doing before, LTD did make more sense because if someone for whatever reason wanted to come after me, my house would be jeopardy.

For my photography stuff, being LTD I feel like is overkill and I don't make enough now to justify it.

[Sugarphreak]

...

[msommers]

Agreed. For lots of purchasing, I think all the GST that you buy in business expenses is deducted off the GST you charges (and technically own back). I think anyways...accountant handle everything lol.

[nzwasp]

So how does the gst play into it when you get a rate from a recruiter for a contract. Like in my situation. I would get $60 an hour is it automatically charged at $60 + gst?

[Sugarphreak]

...

[suntan]

Originally posted by msommers
Agreed. For lots of purchasing, I think all the GST that you buy in business expenses is deducted off the GST you charges (and technically own back). I think anyways...accountant handle everything lol. Yes, that's the whole point of a value added tax. Only the consumer pays in the end.

[Brent.ff]

Originally posted by msommers
Yeah I think if you make below $30K/yr you don't have to charge GST but honestly I don't know you wouldn't for that very reason.


Here's a quick question. I had a very brief time being a SP, and collected GST, following being laid off.

I was then offered permanent at the same place, and took it. So I don't think I hit the 30k mark of revenue..do I still need to do a GST return, if I didn't get to 30k on it, regardless that I charged GST to them?

[nzwasp]

Can anyone suggest any small business accountants for me? I recently incorporated and need one?

[DJ_NAV]

Feel free to PM me. I am a CPA, CA myself and work primarily with small businesses.

[UndrgroundRider]

Originally posted by Brent.ff


Here's a quick question. I had a very brief time being a SP, and collected GST, following being laid off.

I was then offered permanent at the same place, and took it. So I don't think I hit the 30k mark of revenue..do I still need to do a GST return, if I didn't get to 30k on it, regardless that I charged GST to them?

If you collected GST you will need to file a return. Do you have a GST number? If not you can call and explain your situation and they will create you a GST account with a retroactive open date. The 30K rule only determines if you have to charge GST, it doesn't let you just pocket the GST if you've charged it anyway.

[Brent.ff]

Ya I have a GST number as I didn't know if I was going to be doing it for a while or not. Plus the place that I worked wanted me to charge them gst

[nzwasp]

Another question about the GST is there a threshold - for instance my contract is only 4 months and I should make around 33 - 35k in that time. Do I only pay gst on the 3 - 5 k over the 30k or do I pay the gst on all of it. It is being collected from the customer at my rate +gst.

[Gart]

Originally posted by nzwasp
Another question about the GST is there a threshold - for instance my contract is only 4 months and I should make around 33 - 35k in that time. Do I only pay gst on the 3 - 5 k over the 30k or do I pay the gst on all of it. It is being collected from the customer at my rate +gst.

This was answered above.


Originally posted by UndrgroundRider

..... The 30K rule only determines if you have to charge GST, it doesn't let you just pocket the GST if you've charged it anyway.

You'll need to pay back GST collected during your (usually annual) return, minus any deductions (ITCs) you may have during filing.




Link to CRA section (http://www.cra-arc.gc.ca/E/pub/gp/rc4022/rc4022-e.html#P369_24434)

[ExtraSlow]

Well, I got my act together and filed the paperwork, and I am now legally incorporated in the province of Alberta.
I did sit down with a small business accountant beforehand to go over a couple off things, but to be honest, it's not rocket science, and if anyone was in a hurry, you could incorporate yourself in half a day without too much stress.

[suntan]

You have wife? Give her a different class shares (Class "W" - NON voting). Then you can dole her dividends without impacting your own dividend schedule.

[nzwasp]

I didnt do that but I would like to - is it hard to change your structure once you have actually incorporated but not actually received any revenue yet?

[suntan]

Nope, it's super easy. You actually want to do it when the company has no revenue as you have to sell the shares at fair market value.

Just write on a piece of paper that the company sold 100 shares to Sexy Wifey for $1/share. Put it in your company minutes. Make sure they're non-voting shares and a different class than yours!

[ExtraSlow]

My accountant suggested that to make the share thing legit, it helps to have her write youa cheque for the $100 and to deposit that into your business account.
Also, to keep things legit, you should actually issue a paper share certificate.

[ExtraSlow]

If you are currently receiving EI, and are considering incorporating or otherwisely starting a business, it's worth a read over in the Employment Insurance thread to see some of the ramifications of that action.