Navigating Common Misconceptions About Incorporation for Business Owners

Let's talk about some of the ideas that come up about why somebody wouldn't want to incorporate. And I'll label these as misconceptions. The very first one is that you have to have a certain level of revenue or income in order to incorporate. And I've heard this so many times when people have talked to their accountants or they've talked to their financial advisors or their lawyers or their colleagues. And, and specifically thinking of, you know, real estate agents, for example, who can now incorporate, or any type of business, medical practitioner, dentists who are operating a professional corporation, their colleagues or their advisors are saying, oh, no, you have to have $300,000 in revenue, or you have to have $1 million in net income, or blah, blah, blah. There's all kinds of factors that people throw out. And truthfully, it has nothing to do with how much revenue you have at all. And that's one of the biggest misconceptions. The real rule that you want to consider is, are you paying tax at a rate of 12.2% or higher? So you're currently a sole proprietor and you're paying tax of 20%. You should incorporate. Why? Because if you incorporate, your business will pay tax at 12.2%, but you will also be able to pull money out as a dividend. And when you pull money out as a dividend, you can avoid making those costly CPP contributions annually that cost you about $7,000. So in this particular case, if you incorporate, which does have extra costs associated with it, let's say it costs you $3,500 a year to file your annual corporate tax filing. If it costs you an extra $3,500 a year for administration for that entity, you, even though it's protecting you and there's a lot of extra benefit associated with it, there is a cost of 3500. If I can save you 7000 and it costs you 3500, would you do it? And not only are there a significant number of added benefits, but we can put more cash in your pocket by using an incorporation. So the number of revenue dollars that you generate isn't a factor. It's the percentage of tax that you're paying. When you pay more than 12.2% tax in however you're structured, a corporation will allow us to save you money and put cash back in your pocket. Other areas are. Well, it's complicated to set up. Well, it is if you want to learn exactly how to do it yourself, but you can outsource that to professionals who do it all the time. And if you're to do that, definitely focus on a CPA and a legal advisor who have experience setting this up and we'll do a tax plan for you so that you get it set up the right the first time. Other misconceptions would be, well, it doesn't work if you're a real estate agent or a family physician or other types of industries. And in fact, a corporation works in almost every industry. There's certain exceptions where, like real estate agents, for example, weren't able to incorporate for years, and in some instances financial advisors aren't able to incorporate in some instances, depending on the brokerage that they work with. But in many instances you can. And real estate agents can now do it. And professionals, lawyers, doctors, dentists, accountants, orthopedic surgeons, optometrists, physiotherapists, anybody who's practicing any sort of professional service or healthcare, you should be considering a corporation, again, looking at it to say it will help you in your specific industry. But if you're paying more than 12.2% tax, you should have it not only for tax savings and more cash in your pocket, but to provide an extra layer of protection for you. So regardless of your of your industry, unless you're a specific exemption that says you can't incorporate, which is limited really, there's no limitation on your industry to get incorporated. So those are a few key misconceptions that I want to identify. There's probably a lot more, but those are the big ones.