unclespacejam

ur dad’s brother

Politicker

Catalyst

Valued Contributor

Incorporating as a Canadian AE: Worth it?

what the fuck is up u degenerates

here with the ever-burning question of trying to save on income tax (all u canucks will know wtf I mean).

I'm tired of getting slaughtered all year for my hard earned loonies and want to see if any of you have gone the incorporated contractor route with your company

I'm at an employer I've been with for over 5 years and heading into a role change Jan 1 2023 which will increase by income in a material way more so than in previous years.

is incorporating worth the admin work to potentially cut my tax in half?

has anyone out there successfully switched from an employee to a hired contractor at the same company?

😜 contracts

💴 Money Management

🌝 Taxes

22 comments

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SADNES5

Politicker

down voters are marketing spies

Hey.

No. Legally you are in an employer employee relationship with the CRA watching. If you can set your own hours and work for others you can incorporate.

It's not worth it.

I have gone from Canada employee -> worldwide consultant in America with a Canadian consulting business. If you want to talk taxes - I am your guy.

To be honest, you will regret going contractor when you lose all benefits and have to pay much more CPP and EI, and get private coverage for things like prescriptions/dental.

Just curious what is the big payday you're thinking you're moving to? 175k+?

If it's not consistent, it doesn't matter at the end of the year, the overpayments in tax you will get back.

Oh shit another thing - hate paying taxes? When you incorporate you get to pay/prepay expected GST every three months. It's like tax season 4 times a year!

AMA

unclespacejam

Politicker

ur dad’s brother

Precisely the kind of info I was looking for. THANK U.

To be clear I know I’m currently an employee I just wanted to weight out the pros/cons of moving from being employed to working with my current employer as a contractor. The consistent payday will be $200k+.

Just wasn’t sure if it’s worth the headache.

LordOfWar

Tycoon

Blow it up

Regarding my answer below, I was told that it is not worth it until you're making $300k a year consistently or want to be working for multiple companies at the same time.

LordOfWar

Tycoon

Blow it up

I really like this answer, compared to mine below this is REAL experience and that counts for much more than what a bookkeeper or accountant who wants to also be paid will give.

Arzola

Valued Contributor

Business administration

A very good information Sir

jefe

Arsonist

🍁

I was wondering how this would even be possible and how it could make sense. I had some thoughts but @SADNES5 elucidated them much more clearly and in significant greater detail coming from actual experience.

Congrats @unclespacejam on the upcoming promotion and income increase!

unclespacejam

Politicker

ur dad’s brother

Thanks dog appreciate it.

unclespacejam

Politicker

ur dad’s brother

@CuriousFox @SADNES5

CuriousFox

WR Officer

🦊

You rang?

unclespacejam

Politicker

ur dad’s brother

@LordOfWar @jefe

LordOfWar

Tycoon

Blow it up

Thanks for the tag. I'm actually considering this right now to shelter some $$$ from the taxman.

My biggest concern as a sole income earner is going to contract work and the lack of termination pay vs. being a full-time employee, as well as loss of benefits and RRSP room growth. The past few weeks have shown me how much basic prescription drugs can cost when you have a sick family at home.

Most people will just ask to move to contractor status and the standard is a 20% pay bump, since you are now keeping what that the employer usually pays for CPP, EI, benefits, etc. The downside is they can terminate anytime and without cause because you're basically just a hired company, not an employee.

I spoke to an accountant/bookkeeper and might have found a sweet spot. They said you can possibly get a salary but pay commissions to a corp. If that works I would hire my wife as admin/bookkeeping and pay her a salary out of there so she can also grow her RRSP room. You can then write off other stuff like office equipment and transport, more so than being just an employee.

We're in the very early stages of planning our setup so I'm not sure what is needed to keep it legal or how complicated it will be, or even how much we will save. I know there is a tax rate reduction for the first $500k in corporate income, so that would go a long way. This chart shows some stark differences: https://sslgroup.ca/information/tax-rates/

You will likely end up building the corp savings vs. your own savings since you won't pay all earnings out as income. There is also the possibility of paying yourself dividends and avoiding CPP. I think the key will be finding a balance between keeping the most money and maintaining the benefits of being a full-time employee.

My dad is in the stages of winding down his family corp (him and my mom), so I'm also benefiting from some insight into how it plays out in retirement too.

I have not yet approached the boss with this plan, but if I sell it as I'm keeping more money and he doesn't have to actually pay me more, I don't see why he would say no.

unclespacejam

Politicker

ur dad’s brother

This is fucking great info. Appreciate You giving your take. Sounds like it might not yet be worth the time/ effort/ money for me

LordOfWar

Tycoon

Blow it up

Maybe not now, but who knows what will happen in the next 3-5 years.

Wishing you more success and good fortune!

TennisandSales

Politicker

Head Of Sales

i am in the states so it may not be the same but im pretty sure this would NOT work in the US.

The company would have to sign off on this and i bet would cause WAY more work on their end to make this happen then they would want to take on.

also if you are a contractor that would change your benefits eligibility (at least here)

DrSmallprint

Politicker

Account Executive

Pro tip: if anyone askes your house is a church or masque or something.

IRS=cucked

unclespacejam

Politicker

ur dad’s brother

@funcoupons @siralex

unclespacejam

Politicker

ur dad’s brother

@FintechSteve @GALACTIC @ppg @emkayxx @Jbeans @TheDude

TheDude

Politicker

Partnerships Lead

Haven't done it but SADNESS, covered my thoughts exactly surrounding tax implications.

If I were in your shoes, keep the current status quo and start a side hustle leveraging your knowledge/insights. Can you turn this into a course or consulting business?

unclespacejam

Politicker

ur dad’s brother

Could def be a thing. Considering all options!

ppg

Catalyst

All around good guy

Hey Brother,
i don’t get notifications from WR but here I am. It was meant to be.

i have a side hustle (4 corps created so far, one solo-preneur and 3 real estate holding corp) and are on 100% commission employee so here is my take.

Consult a tax lawyer. It’ll cost you a few $Ks, but they will look at your specific situation and will be in a much better position to counsel you.

The employer / employee condition is very important. If you don’t dictate your working hours, you are an employee. The CRA might have a few webpages that are important for your situation.

The tax savings is not there as you will have to pay for the employee part of your salary to the government as well as the EI, CB, etc. AND the salaried part as well.

I don’t want to stop you, so I would do a side by side analysis of employee vs contractor with different amount scenarios. Your total costs of running the business will be low, so that might be somewhat relevant in the calculation.

Let us know the outcome!

unclespacejam

Politicker

ur dad’s brother

Thanks dog. Appreciate the insight.

How are you managing the 4 corps alongside being employed? How do you find the additional admin work, cumbersome or worth it?

ppg

Catalyst

All around good guy

One is closed, 3 are real estate focused with managing a manager taking care of the tenants calls. Paying him a 5% is well worth it to not have to handle the calls. I’m also 2.5 hours away from the buildings so I can’t just hop and go.

To be honest, lots of hours in the morning and at night after the kids are in bed, some weekends, and during “downtime“ at work when I’m not with clients or prospecting.

Delegate the physical work, calls in the car, and lots of emails.

Yeah, I don’t have a life for now. My goal is to transition to real estate investing full time in the next 10 years.