taxes, canada, corporation, sole-proprietorshipLocation: Ontario, Canada.
I once read (sorry, can’t recall where) that by incorporating, you avoid “paying the income tax twice”, but I’m not quite sure what that means.
How does incorporating a sole proprietorship reduce taxes? Is it different for different income levels (e.g. below vs. above $30k)?
Note: the question is not about the merits of registering a corporation in general (like limited liability, etc.), but specifically about the tax reduction, if any.
In Canada a Sole Proprietorship pays no taxes - just the proprietor and doesn’t really count as a corporation. However an incorporated company does pay corporate taxes and then the directors/share holders pay taxes on any dividends etc.
So in summary incorporating doesn’t exactly mean you pay twice but you do have to do twice the paperwork and there is some duplication of taxes. There are no tax benefits for a small company to incorporate. There are liability and other benefits as you mentioned but for taxes if anything it is a detriment.
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