Lydia CPA,CGA

Benefit of Incorporation

 One of the biggest advantages of incorporating a business is limited liability.  This means that the liability of the shareholders is usually limited to the amount that they have invested in their shares in the corporation.  However, many incorporated small businesses are not able to get bank loans without the personal guarantee of the shareholders, so this eliminates part of the advantage of limited liability.  The personal assets of the shareholders are protected from lawsuits against the corporation.  However, shareholders who are directors of the corporation can be held legally liable for some debts of the corporation (such as GST/HST and payroll taxes) in certain circumstances.​

 ​Another major advantage for a profitable small business is the income tax advantage.  A  Canadian Controlled Private Corporation, or CCPC, pays a much lower rate of federal tax (small business rate) on the first $400,000 (in 2007) of active business income than would be paid by an unincorporated business, due to the small business deduction.  Active business income generally does not include investment income or rental income, which is taxed at regular corporate tax rates.  The combined federal + provincial small business tax rate varies from approximately 16% to 22%, depending on the province.  The threshold amount subject to the lower small business rate also varies between provinces.  Keep in mind that this tax advantage is mainly a deferral of taxes until the profits are paid out to the shareholder.  If all the profits are paid out to the shareholder as they are earned, leaving the corporation with little or no taxable income, then they will be taxed entirely as income of the shareholder, at personal income tax rates.

 It is always recommended to seek professional advise from an experienced tax professional before going ahead and incorporating your business.

2014 personal tax return 11 new change

Latest News December 8, 2014 the Canada Revenue Agency (Canada Revenue Agency, CRA) issued by the Canada Revenue Department explained in detail some of the new 2014 income tax adjustments.

1. First, the children's sports Children's fitness amount tax credit increase. Sports tax credit for each child under 16 years old from past $ 500 per person to $ 1000 per person.
2. Second, the search and rescue volunteer Search and rescue volunteer amonut can apply up to $ 3,000 of the return.
3. Third, the family tax credits Family Tax Cut. From the beginning of the tax year 2014, for a home with children under the age of 18 eligible families, up to a maximum tax rebate of $ 2000.
4. Fourth, universal child care allowance Universal Child Care Benefit (UCCB). From January 1, 2015, children under 6 years of child care allowance will be increased to $ 100 per month $ 160 yuan per month, 6-17-year-olds to enjoy a monthly allowance of $ 60. The subsidy is executed from January 1, 2015, but the money will be paid from July 2015.
5. Five volunteer emergency services Emergency Services volunteers, 1000 yuan allowance policy change.
6. Six, adoption expenses Adoption Expenses, each child adoption expenses deductible amount raised to $ 15,000.
7. Seven, medical expenses Medical Expenses. Costs incurred as a payroll tax credit for the cost of some disability, or to help manage severe diabetes services can now be tax deductible as a medical expense.
8. Eight, investment tax credits Investment Tax Credit. Mining development tax credit has been extended, for the circulation flow-through share agreement reached in April 2015 before the tax breaks will also be eligible.
9. Nine, GST / HST Credit. Individuals no longer need to apply for a separate GST / HST CREDIT, when the tax declaration form, the Canada Revenue Agency will confirm eligibility based on personal income declaration. If you have a spouse, they can accept only one GST / HST credit, credit will be paid to the person being assessed, the amount remains unchanged.
10. X. The new Online mail service. From the beginning of February 2015, in the 2014 tax declaration when you provide your e-mail address to sign this new service, you can at any time, any place can enter their tax records system queries. You also can choose to accept e-mail notification when your Notice of Assessment or Reassessment has been completed.
11. XI, starting February 9, 2015, the Canada Revenue Agency will launch a mobile application (APP) for individual taxpayers to use. To facilitate the use of mobile devices to log taxpayer Revenue tax records online service queries.

2014 personal tax return deadline is April 30, 2015.