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Hi Allan,
We moved from India to NB, Canada 10 days back. I would really appreciate some advice. My husband has 2 IT products. One product is a pre-packaged software and other product is also a pre-packaged software but we do provide customization services for this product. Both products have combined profit of 60000 cad per annum. We are planning to incorporate, one of our product as we would like to try to raise some funding. I work for both companies but I do not take any salary. So, officially I am unemployed. We also pay a fee of 220 cad for office to an incubator. Please read my questions below-
1. Should we incorporate both companies separately? Should we keep one of them a sole proprietorship so we can show home office, home internet etc.. as office expense.
2. If we incorporate, should my husband take a salary or dividend. We are not planning to apply for loans or saving for pensions etc..
3. How can we use my unemployment to save taxes?
4. How much taxes can we expect to pay at the end of the year.
Thank You
Hi, incorporate the companies separately, so you have the option of selling one business without having to sell the other. In addition, you may be eligible to claim the lifetime capital gains exemption of $860,000 / shareholder, which allows for tax-free profit of up to $860,000 on the sale of the corporation's shares.
Dividends are better, since they are not subject to costly CPP premiums and do not involve the headaches associated with payroll compliance. If you are actively working in the corporation (at least 20 hours per week), then you can receive a reasonable dividend to compensate you for your work. This is a good strategy to save tax, particularly since you have no income currently and are therefore in a low tax bracket.
The corporate income tax rate is 13.5% on taxable profits.