Need some help understanding how incorporating works as a potential employer wants to pay under this arrangement.
My understanding is that I incorporate company xyz inc and then my employer pays that company. Company xyz then pays me as an individual. Whatever my corporation pays me is considered to be personal income and whatever goes into the company is taxed under corporate tax structure.
The company can then write off certain things, part of my house, lease payment on a car, computers etc... My understanding is that I can pay myself just enough to cover living expenses and leave the rest in the company, which would put me in a low income bracket for personal tax and the balance that stays in the company would be taxed at the lower corporate rate.
I wouldn't be eligible for EI or CPP, but could draw down from the company balance if I get laid off. I was also told that I need to be able to show income from more than one contract each year or I run the risk of being declared a PSB in the event of an audit?
I plan on getting an accountant as I don't want to piss of the CRA, but wanted a bit more info before I do anything.