Skip to main content

Blog

Welcome to Numetrica's Blog — your hub for expert insights on accounting, bookkeeping, finance, and business strategies.
3 minutes reading time (669 words)

Should you incorporate your business?

A few years ago Taylor started a little YouTube business start up as a side business and started to post her videos about astrology.  She also had a link from her YouTube channel where she was selling items that was related to the videos.

Next thing that she knew, she started to get tons of people following her YouTube channel.

This is an area that never gets old. People have been fascinated with fortune telling and cosmic interpretations.

She also her social media channel and started to get lots of followers there as well.

Her weekend and overnight business took off and she was making way more money that she needed to live.

She came to us with question.

Should I incorporate my business?

She knew one advantage of incorporating which was that her liabilities were limited to the asset of her corporation and her personal assets would be protected. 

We told her that there were numerous advantages to incorporating than limiting her liabilities.  Specially tax advantages when you incorporate your business or start up business.

She was making about 150,000 per year as net income and her tax liability was about $50,000.

She also had a marginal tax rate of almost 50%. Meaning that one every dollar after the 150,000 income she would have paid half of the that in taxes.

One more piece of crucial information was that she only needed 80,000 income to pay for her livelihood.

These are your tax benefits of incorporating your small business.

  1. Once you incorporate, we put you on payroll and pay you only what you need to live. The tax owing on 80,000 is only 22K.
  2. Since she went on payroll, the tax and CPP was automatically deducted and sent to CRA so she didn’t have to pay 22K to CRA in one chunk. Beside not so many people can stash 22K cash to pay CRA in one check.
  3. The extra income stayed in the corporation and corporation only paid about 12% in taxes. So she deferred 27,000 in taxes (49-22=27)
  4. Since she was on payroll, she got a T4 from her corporation of 80K ad based on that T4, the bank qualified her for her 1st home mortgage.
  5. Flexibility of getting more income from the corporation if your livelihood changes.
  6. No fear of making more money. Most people believe stop working more since they associate more money with more taxes. When you incorporate and you are on payroll, you know that it is the corporation who will pay the tax and not you so you can make more and more.

Tax Deferral – Active Small Corporations Tax Rates Are Lower Than Personal Tax Rates

She deferred 22,000 in one year, if she does this for the next 10 years, she had deferred $220,000. It means she kept this fund in her corporation.
Her corporation can now go ahead and re-invest this fund in any assets, she can buy more advertising, but better equipment, hire more people, and so on.

Is there a magic income number to determine if you should incorporate or not incorporate?

Yes, there is, but it relates to your finances.
Although many people think there isn’t, I believe there is. This the number associated with your monthly personal expenses.

For example, let’s say these are your monthly expenses.

Mortgage 3000
Car payment 2000

Grocery 1500
Vacation 500
Sports 200
Gifts and incidentals 500
Total comes to 7,700 per month. Which come to 92,400 per year and tax bill of 26K.

So your magic number is around that.

Now if that magic numbers drops to 30K then incorporate as soon as you are earning more than that.

The numbers and tax rates are close to the tax rates In 2022 tax year.

Back to Taylor, not Taylor Swift, she went on to have a strong Channel and built a huge fan base.

If you are also thinking about incorporation your business and have questions, get in touch with us so we can determine your magic number.

×
Stay Informed

When you subscribe to the blog, we will send you an e-mail when there are new updates on the site so you wouldn't miss them.

How to Communicate with the CRA: A Comprehensive G...
We answer your "how to" questions about the HST.
 

Comments

No comments made yet. Be the first to submit a comment
Already Registered? Login Here
Monday, 22 April 2024

One-Stop Shop for Accounting
and Bookkeeping in Ottawa

Frequently Asked Questions - FAQs

Does Numetrica offer tax services for small businesses in Ottawa?

Absolutely! Numetrica is your expert small business accountant in Ottawa, dedicated to providing exceptional tax services tailored for the unique needs of small businesses. We are committed to delivering expert tax preparation, accurate filing, and insightful strategic planning. Our tax services are designed to efficiently minimize tax liabilities and enhance deductions, ensuring that your small business not only adheres to the latest tax regulations but also optimizes financial opportunities.

What makes Numetrica different from other accounting firms in Ottawa?

Numetrica stands out as a leader among accounting firms in Ottawa for our personalized approach & comprehensive expertise in accounting & bookkeeping services. We focus on building long-term relationships with our clients, offering customized solutions that evolve with your business.

What accounting services does Numetrica offer in Ottawa?

Numetrica provides a comprehensive range of bookkeeping and accounting services in Ottawa, including financial statement preparation, tax planning, payroll services, and business coaching.

Our Ottawa accounting firm specializes in both personal tax and corporate tax services, providing tailored solutions to meet the specific needs of your business or personal finances. Whether you're a growing business seeking robust corporate tax strategies or an individual in need of personalized tax guidance, Numetrica is equipped to deliver excellence.

How can Numetrica's bookkeeping services benefit my business in Ottawa?

Our bookkeeping services in Ottawa offer meticulous record-keeping and financial analysis, helping you make informed decisions, maintain cash flow, and streamline your financial processes. We use the latest software and practices to ensure your finances are managed efficiently.

How much does bookkeeping cost in Ottawa?

The cost of bookkeeping services in Ottawa can vary widely depending on several factors such as the size of your business, the volume of transactions, the complexity of your financial needs, and the level of expertise required.

Contact us detailed quote based on your specific business needs. Remember, investing in professional bookkeeping can save you time and money in the long run by ensuring accurate financial records and compliance with tax laws.

Numetrica Accounting

Awards / Featured On

CPA - Chartered Professional Accountants
Rotessa
Wagepoint

Reviews

Check what some of our clients are saying about our services.
  • Samantha Biron

    I highly recommend Moe Tabesh. His service is phenomenal, to say the least. His tax knowledge is extensive and he’s been able to save me a substantial amount of money by following his recommendations. In addition, he is warm, kind, understanding, positive, and flexible, which are qualities I find rare in most accountants I’ve worked with. You’re in good hands with Moe, I can’t recommend him enough.

    Samantha Biron

    President and Founder, Find Your Tribe
  • Jeremy Prudhomme

    Moe and everyone at Numetrica have been incredible at helping with my new corporation and corporate and personal tax returns and my other small business. Their accounting skills are out of this world and the technology they use makes everything so simple and fast. The time you will save will be worth every penny. Thanks again Moe for all your help!

    Jeremy Prudhomme

    CEO, Jeeman TV
  • Farshid Dehnavi

    Mr Tabesh (Captain Number Cruncher) and his perfect team are not only professional in their fields, they are extremely passionate about their clients! Numetrica City continues to support us with corporate and personal tax returns, bookkeeping (thank you so much Sherry ) and We are so happy and appreciative for you and your responsible team, Moe!!!
    I really recommend these guys to everybody.

    Farshid Dehnavi

    President and CEO, Ink Plus
  • Keddy Declan

    I did my first Corporate tax return and cloud accounting with Numetrica City and I am very satisfied with the work they did. The team was very responsive and answered all my questions. I 1000% recommend their services.

    Keddy Declan

    CEO , IT Referrals
  • Sibeso Kehinde

    I would highly recommend Numetrica City-Accountants, Tax and Bookkeepers. Exceptional customer service. I am assured that all my company tax services and payroll are taken care of because of the great team that Moe has. I like the fact that I do not have to worry about driving to a physical location for my accounting services, my company's accounting tax preparations are done online due to the excellent cloud service Numetrica City has. Definitely score a10/10. Thank you for all the good work that you guys do. Greatly appreciated!

    Sibeso Kehinde

    OUR PROCESS

    Discovery

    Discovery

    We’d love to hear about your goals and aspirations. After understanding the big picture, we’ll dig into the details of your bookkeeping process so we can assess your needs.
    Proposal

    Proposal

    Once we understand your needs, we’ll send over a proposal that outlines our plan for tackling your challenges and a fixed monthly price for those bookkeeping services.
    Set-up

    Set-up

    Once you accept our proposal, we’ll get your bookkeeping tidied and up to date and begin implementing cloud accounting tools that will ensure proper bookkeeping going forward.
    Get Connected

    Get Connected

    Once the set-up is done, the hard part is over. You’ll be connected to your CPA-level bookkeeper and they will become your main point of contact.
    Reviews

    Reviews

    Once the clean up is done, the hard part is over. You’ll get connected to your bookkeeper and he/she will become your main point of contact. Don’t worry, we only select the best CPA or CPA students.

    Your Unfair Advantage

    Stay up-to-date on the latest accounting news, tax updates, and financial tips. Stay ahead of the game and make informed financial decisions with our expert insights and analysis. Sign up now to start receiving our newsletter!

    Join our family

    Clients

    Carling Dental
    David Pratt
    Vitallab Solutions
    iHotWeb
    Smiles by Pocock
    Jeeman
    Samuel Associates
    Downtown Dental
    Numetrica

    Trust in the superhero accountants of Numetrica to keep your numbers in order and for expert advice on growing your business. Numetrica specializes in providing clients with in-depth accounting and bookkeeping services in Canada and the United States as well as financial advice to assist you in making the right decisions for your business.