Any IT contractor here -- Need advise

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kabutar12
Member since: Nov 08

Posts: 130
Location: Brampton
Post ID: #PID

Posted on: 15-02-11 16:22:01

Hi Guys,

I am planning to incorporate and try contracting for few years.
Have some questions and will appreciate if any existing contractor could help me out.

My questions are around IT contracting market, Taxation and would appreciate if you could share your experience with contracting.

Fido
Member since: Aug 06

Posts: 5286
Location: Canada
Post ID: #PID

Posted on: 15-02-11 20:19:03

I am sure there are many people willing to share the desired knowledge .... We also have a no. of threads on this already .... I am sure you have gone through them and in case there are un answered queries , please post them .

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Fido.

dudewheresmycar
Member since: Jan 07

Posts: 980
Location:
Post ID: #PID

Posted on: 17-02-11 13:35:53

Cheapest way Incorporate numbered company federally for 200$

https://www.ic.gc.ca/app/scr/cc/CorporationsCanada/hm.html?locale=en_CA

When u incorporate u get a choice of filing on anniversary of company or calender year i.e dec end

I think choosing calender year is better because tax deadlines are close with ur personal tax time and u dont need to go to a accountant twice..

Apply for GST/HST number with CRA (This is free)

GST/HST collection and remittance are not required if ur sales are below 30K but if u collect u need to remit GST/HST.

Always collect GST/HST , because u get to keep some of this money, this will help u cover some of the cost of hiring a accountant for ur tax returns which costs around 500.

aqua
Member since: Jan 11

Posts: 134
Location:
Post ID: #PID

Posted on: 06-05-11 10:43:43

Any ideas why the federal incorporation is cheaper then ON?

Also, from a tax perspective, which is better? The contractor owning the Inc or otherwise non working wife owning the Inc?

dudewheresmycar
Member since: Jan 07

Posts: 980
Location:
Post ID: #PID

Posted on: 06-05-11 21:03:29

Generally ownership has no bearing in running the company..

Ownership matters when it comes to paying dividends.

Generally preferred way is to pay salary upto 70K per person and only after that paying dividend is selected as a strategy.

U have to pay 20$ every year to keep federal company active. where as ontario incorporation has no such requirement.. long run may be ontario incorporation may be cheaper if ur run business only in ontario.

Quote:
Originally posted by aqua

Any ideas why the federal incorporation is cheaper then ON?

Also, from a tax perspective, which is better? The contractor owning the Inc or otherwise non working wife owning the Inc?

aqua
Member since: Jan 11

Posts: 134
Location:
Post ID: #PID

Posted on: 07-05-11 10:57:09

Thanks Dude!

Fido
Member since: Aug 06

Posts: 5286
Location: Canada
Post ID: #PID

Posted on: 09-05-11 11:21:55

Quote:
Originally posted by dudewheresmycar
Generally preferred way is to pay salary upto 70K per person and only after that paying dividend is selected as a strategy.

Can you back that up with some numbers ??

I feel that dividend 100% and no salary in case of Corporation may leave more net income with you as compared to salary taking ...

For one Corporate tax rate for small businesses is 10% roughly as opposed to higher tax rate on salary income .

For 2 : in case of eligible dividend income the tax paid on dividend is credited back and the net tax liability is less ...

Crunch some numbers and let us know what it looks like ...

Plus there s no EI that you can get if you are the director or the spouse .. so it makes less sense to pay EI at the first place ....

The only down side I see in case of dividends is lack of CPP contribution and subsequent pension benefits post retirement ... You need to make a trade off here .

I would say keep 2 classes of shares amongst both the spouses so as to divide dividend at will from year to year .

Also give a small amount of salary say 10K each so as to reap salary based deductions .....

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Fido.

Contributors: Fido(5) dudewheresmycar(5) aqua(3) ITguy07(2) kabutar12(1) G13(1)

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