Advantages and Disadvantages of Incorporating

Advantages and Disadvantages of Incorporating

Advantages of Incorporating

  • Limited liability
  • Small Business deduction leading to lower tax rates (see our corporate taxes payable notes)
  • Income splitting opportunities
    1. Reasonable Salary to wife
    2. Reasonable Salary to Kids and other family members
  • Access to lifetime capital gains exemption (see our QSBC Notes)
  • Flexibility – re year-end selection
  • Facilitate estate planning (see estate freeze notes)
  • Owner-manager compensation
    1. Dividends vs. Salary (see Dividends vs. Salary Notes)
      • Capital Dividends
    2. Year-End Bonuses

Disadvantages of Incorporating

  • No personal credits (see personal tax credits notes)
  • Inability to claim corporate losses against other sources of income
  • Cost of initial corporation

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