A new guide has just been published by Éditions du Journal, written by columnist Ghislain Larochelle and Luc Audet, to help entrepreneurs make the right choice.
“Should I incorporate? This is a question that Ghislain Larochelle is asked on a regular basis. However, the answer is not always easy to find. To help entrepreneurs make an informed choice, he co-signs a new guide with Luc Audet, Incorporate? The big question, published by Editions du Journal.
“There are already books on the subject, but they are written in very technical language. We wanted to offer a guide that would be accessible to everyone,” explains Ghislain Larochelle, real estate columnist. He is also the head of Immofacile.ca, a company that offers training and coaching to real estate investors.
“There is no magic number that determines when incorporation is a good decision,” he adds. Different aspects are to be considered, including turnover, but this does not say everything. »
The authors first focus on undoing a few urban legends surrounding incorporation, including that it allows you to pay less tax.
“That’s not always true,” says Luc Audet, lawyer and business advisor who co-authored the guide. It all depends on the activity and the type of income [passif ou actif] generated by the company. »
“There are different situations where choosing to incorporate becomes advantageous from a tax standpoint,” he adds. For example, when the business generates more money than the entrepreneur or the self-employed worker needs to live, incorporation allows the surplus to be left in the company and lowers his personal tax rate. »
Many advantages
According to the authors, even if forming an SPA does not save tax, it may be appropriate to take the plunge. In fact, the list of advantages is long, including the image of professionalism that incorporation provides, the protection of personal assets, the possibility of borrowing in the name of the company, the distribution of profits among shareholders, estate planning and tax, etc
“The guide is aimed at self-employed workers and entrepreneurs regardless of their field of activity, not just real estate investors, even if some information concerns them directly,” emphasizes Ghislain Larochelle.
Incorporating is only the first step. Once the company has received its letters patent, there are still several decisions to be made and steps to be taken which the authors detail in a section of their book.
“People join in and think it’s over, when the process is more complex than it seems,” comments Ghislain Larochelle.
Strategic question
If you haven’t already done so, you must register the business in the source deduction file at both levels of government, ask for its tax numbers (GST and QST), find an accountant for bookkeeping and the production of the tax declaration of the SPA, filling in the “minute book”, a legal obligation, etc.
“We also have to decide how we want to proceed with the transfer of money to the company, explains Ghislain Larochelle. This is a strategic question that comes up often and we dwell on it in the book. »
The guide also addresses several questions related to the financial management of the incorporated business, starting with the miscellaneous costs that must be taken into account, as well as the accounting system to be put in place.
Finally, it deals with the three most common mistakes in matters of incorporation, including that of neglecting the sustainability of the business. As it evolves, there will indeed be many decisions to be made that will have an impact on the company’s taxation.
“We wanted to offer the most complete guide possible that entrepreneurs might keep to refer to when needed,” concludes Mr. Larochelle.
A book that will to find out regarding the following points
- Why incorporate and the legal form to take
- Once incorporated, what to do to comply with laws and regulations
- How to manage money within the incorporated company, including its financing, miscellaneous expenses, etc.
- Assess all taxation and tax issues
- Extend incorporation to real estate and other opportunities
Some myths regarding l’incorporation
- Incorporating automatically allows you to pay less tax
- An incorporated entrepreneur is protected from any lawsuit
- In a corporation, all shareholders are equal
