Hi @ntn - Please see my responses below:
- What are the steps involved in creating a corporation
-The most common ways to incorporate are either through the services of a lawyer or you can use a third party provider, which is likely cheaper, to assist with the requirements. Examples include https://www.ownr.co and https://www.founded.co. If you are interested in using the services of a lawyer, you can email me and I can provide you with a referral.
You can also incorporate yourself (by going in person to the Ministry’s office), but as there are several important steps, I would suggest either a lawyer or a third party provider.
- Is it fine to open a corporation on our own or is it better to have a CPA create the corporation.
-Typically, CPA’s don’t create the corporation as it is more of a legal process. The main steps include choosing a corporate name, choosing a jurisdiction, and submitting your articles of incorporation. The articles are an important process, which is why a lawyer or a third party provider is suggested.
- What are the costs involved?
-A lawyer would likely charge anywhere between $800 and $2,000, which would include the associated registration and incorporation fees. If you use a third party site, it would be cheaper, but you would not be getting the professional guidance of a lawyer.
- What are the benefits of incorporating over working as contractor
-The main advantages are liability protection, tax deferrals and the lifetime capitals gains exemption (if eligible), which would allow you to sell your company’s shares in the future without any capital gains tax, up to a maximum amount. There are of course other benefits, but the above are important ones.
- GST/ HST: When invoicing a client, through a corporation, should such taxes be applied in addition to the sub-total amount (invoiced cost/hours),
-If your company is GST/HST registered, then yes, generally speaking, you would need to charge your GST/HST (depending on the province). Please note there are certain goods/services that are exempt, but this assumes GST/HST is required.
- if client is not registered in Canada (eg: a corporation in the US)
- The situation may not be ‘cookie-cutter’ as it depends on the situation. If the client is a true, Non-Canadian entity located outside of Canada, then it very well be no GST/HST is required. I would have to discuss this over the phone to determine the exact scenario.
In a corporation with only the owner and no employees, once the corporation has received revenue/income from clients, what options does the owner have, to pay self, through
- dividends only or
- a combination of dividends and salary.
- what are the tax benefits / implications
- Salary can be paid out without restriction (assuming there is cash flow to pay out the salary). For Dividends, if there are profits within the company, then dividends can be paid out also. An owner can decide to pay either, both, or a combination of salaries and dividends, depending on the optimal tax plan. For the benefits/implications, my objective is to design a salary/dividend package that optimizes the individuals and business tax situation. For further specifics, you can contact me if interested.
- How to plan for RRSP, EI, Pension and other aspects of retirement, while minimizing tax liability.
-This is a very good question. Although not complex, there are various factors to consider. I would suggest contacting me so we can get an understanding of your situation.
- What steps are required to be addressed, say if a Spain based contractor to works on a contract with a client in Germany, but the Canadian corporation is the vendor for the German client? (German client pays Canadian corp, and Canadian corp pays the contractor in Spain). Would this be same as having a Canadian Contractor and a Canadian Client?
-Essentially, the revenues and expenses would need to be accurately reported in the Canadian entity to pickup the underlying transactions/activity. If the revenue is $1,000 and the expense is $750, then the taxable income is $250 in that situation. There may be unique tax considerations but I would need to explore this further depending on the facts.