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Sole Proprietorship or Incorporation?

    Home Accounting Services Sole Proprietorship or Incorporation?
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    Sole Proprietorship or Incorporation

    Sole Proprietorship or Incorporation?

    By sdg team | Accounting Services, Tax | 2 comments | 6 November, 2017 | 0

    Sole Proprietorship or Incorporation is one of the most frequent questions we have been asked during our initial consultation.

    Introduction

    We have recently experienced an increasing demand with regards to the consultation service on their scenario of shifting from employee to contractor for a higher hourly rate. One of the tough questions for them to answer is whether they should start their business as a sole proprietorship or incorporation. We prepare this article with the intention to provide some brief introduction on the differences and considerations between.

     

    1. Limitation of Liability

    As a sole proprietorship, you will still be exposed to the financial and legal risks of operating a business. However, as a corporation, you can limit your exposure to business risks, as the corporation acts as a sort of buffer.

     

    2. Income Tax Implications

    As a sole proprietorship, all the business income needs to claim on your personal tax return. However, as a corporation, business income will be taxed at the corporate level with a lower tax rate first. You are only liable for personal tax once you pay yourself with corporate money. Besides, you have more options with income tax credit and expense deductions as a corporation.
     

    3. Complexity of Operation

    The biggest advantage of sole-proprietorship is the operation is simple and the cost is low. You don’t need to prepare a separate tax return for your business. However, in the case of Corporation, you have more rooms for the tax planning but this will incur an additional tax advisory fee.
     
    This is only a preliminary introduction, every person will have its unique situation with more considerations. If you want more analysis tailored to your situation, please feel free to give us a call and set up your free initial consultation.

    This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation.

    — Andrew Chen

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    About Us

    SDG Accountant began in the spring of 2014 as an accounting firm dedicated to servicing clients with tax filing in the Greater Toronto Area. As clients appreciated working with our firm, more referrals were happening and our firm continuously grew in size. Through our customer-focused service, we rely on our client’s satisfaction into attaining more repeat business and referrals.
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    • Home
    • Services
      • Accounting Services in Toronto
        • Accounting & Bookkeeping
        • On-site Bookkeeping / Outsourced Bookkeeping
        • Payroll Services
        • Outsourced CFO & Controller Services
      • Canadian Tax
        • Corporate Tax Accountant Toronto
        • Personal Tax Accountant in Toronto
      • US Tax
        • Individuals
        • Expatriate Tax
        • U.S. Tax and Canadian Tax
        • Businesses
      • Business Advisory Services
      • Business Registration
      • CRA / IRS Representation
        • CRA Tax Audit Support
        • VDP – Voluntary Disclosure Program
      • Notice to Readers
    • Our Team
    • Our Clients
      • Online Businesses and E-Commerce
      • Small Business Accountant in Toronto
      • Car Dealerships
      • Land Developers and Construction Companies
      • Law Firms
      • Doctors and Dentists
      • Residential And Commercial Real Estate Landlords
      • Real Estate Professionals
      • Retailers
      • Manufacturers And Distributors
      • Long-haul Truck Drivers
      • Not-for-Profit Organizations
      • Restaurants
      • Gas Stations
    • Resources
      • About Us
      • Testimonials
      • Blog
      • Careers
      • Canadian Tax Filing Deadlines and Due Dates
      • Filing Information
    • Contact Us
      • Request A Consultation
      • Locations
    SDG Accountant