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Why Do You need an Accountant to Incorporate Your Business?

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If you are planning on incorporating your business in Mississauga or anywhere in Canada, one of the most important decisions that will take you in the right direction is to find the right professional accountant.

An accountant is well equipped with all the latest rules and regulations. Hence, he is in a better position to assess your individual and family tax situation and give you personalized tax advice and appropriate corporate structure. Once your accountant is aware of your tax situation, he or she can work out the exemplary business structure ultimately mitigating your tax burden. He will consider various factors for tax planning like income splitting with your family, who will hold the business control, and how much control every member should retain. 

Forming a Holding Company 

An accountant after thoroughly assessing your situation can advise you whether incorporation as a holding company will help you shield your profits. He or she can explain other options like setting up a family trust to help your corporation achieve more profits.  If you need to know something you can contact an accounting firm to get the help needed.

Creating a Family Trust

The four main objectives of structuring a family trust when used in conjunction with a corporation are:

  • Income splitting with family members through the trust
  • A tax-free transfer of ownership to the next generation
  • Sustain control of the corporation with the founders.
  • Cut down estate taxes

When a corporation introduces a family trust, the value of the business must be evaluated by a valuator. This value is accredited to the founder’s utilizing special shares (usually an estate freeze). This authorizes the beneficiaries of the trust to benefit from the future growth of the corporation.

Establishing a family trust is a far more complicated and detailed process than it looks like in the above paragraph. Before further pursuing a family trust in conjunction with a corporation, take on board a professional accountant in Mississauga to have an expert’s eye on the whole process and get some valuable advice.

Maintaining your minute book

A minute book is a collection of important documents that prove the status of your business as a legitimate corporation. The typical components of a minute book are:

  • A certificate of incorporation
  • Corporate bylaws
  • Director, officer, and shareholder registers
  • Share certificates 
  • Company structure
  • Minutes of meetings

Your books can be maintained by a bookkeeping expert and it is good to give them the books.

It is mandatory to update your minute book after every annual meeting, or else you could face some significant penalties. Hiring an experienced accountant is one of the best investments you can make to avoid any unnecessary fines and penalties. He or she can professionally maintain your minute book and ensure everything is organized and updated and protect you from tax authorities. If you need further details about the minute book read my article “Incorporation Services in Mississauga”.

There are several factors to consider when deciding to incorporate your business. If you are still uncertain about incorporating your small business, our experienced and professional team at Filing Taxes is here to set you on the right path considering your personal business situation. Feel free to reach out to Filing Taxes at 416-479-8532. Schedule an NTR engagement appointment with us and take the first step towards proper management of your finances.

You can incorporate yourself in Canada at any registry office, but you’ll need to provide the registry with the appropriate documents.  You require some technical knowledge to properly do this yourself or you can pay the registry for a basic minute book that outlines standard classes of shares and other details required for the Articles of Incorporation.  You’ll need to perform a nuans search for your chosen business name to avoid any legal issues, otherwise, the registry will assign your corporation a unique numbered name like 1234567 Ontario Ltd.

There are several reasons why you should incorporate your business, even if you are the only employee. Sole proprietors can incorporate themselves, and there are several benefits to doing so. You don’t often think of corporations as a one-person show, but guess what? It’s totally possible. You can be the CEO, Treasurer, Secretary, and the only shareholder of the company. But just because you’re riding solo, doesn’t mean you’re exempt from the rules. You still need to properly prepare minutes (corporate record keeping), make important decisions, and file the necessary legal documents for your incorporation.

The answer is simple: the earlier the better. The shareholder agreements, bylaws, and other corporate documents lay the foundations upon which a start-up can thrive. Failing to incorporate at the right time and in the right place can hobble the business with an unfriendly start-up ecosystem. You should incorporate as early as possible after you have validated your business idea and concluded that it’s commercially viable and that you are ready to invest your time and money into it.

When it comes to tax planning for Canadian small business owners, it might make sense to incorporate your business. As a Canadian business owner, you should be looking for ways to minimize your tax burden and maximize your after-tax income. Incorporating a business can do just that. Depending on what your business does and which province you operate in, incorporating can lead to lower taxes. Once the business is profitable, incorporating can also save you money.

If your business is earning more than you need to match your lifestyle, you’ll be able to take advantage of tax deferral. From a tax perspective, there is no magic number of earnings that says when you must incorporate. from a legal perspective, if you’re operating in a high-risk industry, that is, with a high likelihood of being sued, you may want to incorporate from the get-go. In that case, you may want to incorporate even before you can take advantage of the full tax benefits of corporations to protect your personal assets.

You may choose to incorporate your business federally or in a particular province or territory. How much it costs to incorporate in Canada depends on what kind of business incorporation you choose and where you are incorporating.

Disclaimer: The information provided on this page is intended to provide general information. The information does not consider your personal situation and is not intended to be used without consultation from accounting firms and financial professionals. Salman Rundhawa and Filing Taxes will not be held liable for any problems that arise from the usage of the information provided on this page.

Salman Rundhawa
Salman Rundhawa
Salman Rundhawa is the founder of Filing Taxes. Salman provides valuable tax planning, accounting, and income tax preparation services in Toronto, Mississauga, Oakville, and Hamilton.

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