“Active Canadian-controlled private corporations that carry on business in Canada enjoy significantly lower tax rates than individuals,” says Chartered Accountant Steve Blazino, Fitzpatrick & Partners LLP in Thunder Bay.
In 2008, individuals resident in Ontario, earning over $76,000 will pay an effective tax rate of over 43.4 per cent, and 46.4 per cent on earnings over $123,000. Compare this to active Canadian-controlled private corporations that are Ontario-resident corporations paying only 16.5 per cent on their first $400,000 of net earnings.
“This can result in a tax deferral of 29.9 per cent – allowing corporations greater access to cash in order to fund operations, capital asset acquisitions, business expansion and investment,” explains Blazino.
Just remember that this tax deferral only applies to funds that are left in the corporation for corporate use. Funds used for personal benefit will attract tax at the individual marginal rates. That means the more you can leave behind, the greater the benefit of the tax deferral.”
These tax savings can also greatly reduce your dependency on lending institutions.
Brought to you by the Institute of Chartered Accountants of Ontario.
The Institute of Chartered Accountants of Ontario is the qualifying and regulatory body of Ontario’s 33,000 Chartered Accountants and 5,000 CA students. Since 1879, the Institute has protected the public interest through the CA profession’s high standards of qualification and the enforcement of its rules of professional conduct. The Institute works in partnership with the other provincial Institutes of Chartered Accountants and the Canadian Institute of Chartered Accountants to provide national standards and programs that are used as examples around the world. </em>
