Have you wondered if you should incorporate your business? Historically the income tax system in Canada has benefited incorporated Canadian small businesses. Although the income and deduction calculations are almost identical to an unincorporated business, the major differences are in the corporate taxation structure and tax planning opportunities.

When developing the tax plan for your business, you and your advisor should look for opportunities in the following areas:

  •  Income splitting with family members;
  •  Tax deferral to the future;
  •  Estate planning for you and your family;
  •  Utilization of the capital gains exemption; and
  •  Planning your retirement, including disposing of your business.

Director & Personal Liability

In a Tax Alert titled “Abuse of Source Deductions and GST/HST Amounts Held in Trust” CRA warned that businesses must hold source deductions and GST/HST amounts in trust for the government. Penalties and interest and possibly personal liability for the directors will be the result if this is not done. If you’re not sure what this means for your business, please don’t hesitate to give us a call.

Federal legislation allows CRA to collect unpaid amounts through garnishments, assessments of the directors, seizure and sale of the assets of the debtor corporation, an assessed director or a sole proprietor, and any other means of recovery.

Taxpayers who have not complied with this requirement may make a voluntary disclosure to CRA. The taxpayer will not be penalized or prosecuted if valid disclosures are made before CRA begins any compliance action against the taxpayer.

Taxpayers may only be required to pay the in trust amounts owing plus interest.

Since personal and corporate tax as well as family law issues can make this topic complex, please contact our office to discuss your individual situation. Additionally, you can book a free consultation by calling us at 250-744-3854.