- March 13, 2018
- Posted by: Asif Rahemtulla
- Category: Uncategorized
When setting up your business, there are lots of decisions to make. One of the most important, particularly for your tax situation, is whether you should choose to be a sole proprietor or a corporation. There are some significant differences between the two, so let’s break down each one and why you might choose it as an option.
In Canada, structuring your business as a sole proprietorship means that you are the one and only owner and make all the decisions. You also keep all the profits and have no shareholders. Setting up a sole proprietorship is easy and very cost effective.
Along with keeping the profits, though, you are also personally liable for any debts or other obligations. This means that your personal assets may be at risk if you owe money on your business that you cannot repay.
Income from a sole proprietorship is included in your personal income tax. During periods of lower profits, you would be taxed at lower tax rates. If your business does well, however, that income could translate into a higher marginal tax rate and more taxes being deducted. All profits from a sole proprietorship are subject to your personal tax rate.
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