Both JP and Tom West believe that it is a wonderful idea to incorporate your real estate business; a No Brainer to anyone making more than 200K.
If you are claiming your income on your personal taxes you are in an insanely high tax bracket.
Should you incorporate you are considered a small business and receive significantly lower tax rates. Basically 40% of taxes off of the top!!
The owner, yourself, could be paid in numerous ways as a shareholder. Tom mentions if you do it by dividend you could have major tax savings.
Having a corporation allows you to save within it, and because you will be saving 40% of your current taxes, designate a small portion to go into a savings account for your future.
Once you file your taxes for your first year, payments will be divided out for the next few years allowing equalization in expenses.
You have to pay CPP no matter what you do - sole proprietor or incorporated, but the corporation will pay less in taxes.
Income Split
The downside to Incorporations:
Section 85 allows you to roll over assets to the corporation, allowing you to deduct those.
Make sure that your relationship to the brokerage is CLEAR, have the proper documentation with the proper language
Having a corporation protects you personally
The Personal Real Estate Corporations will allow you to have your children involved, and this is a great way to have flexibility in the future and allows for more planning opportunities
As a corporation, you have the flexibility to choose your year-end.
Really good to have communication with your professional team often, and allow them to communicate with each other to make sure all bases are covered on all levels.
Connect with Tom West:
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tom@swcpacga.com
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Email: jpmcavoy@conductlaw.com
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