Incorporating Your Business

A sole proprietor may take advantage of lower Small Business Deduction (SBD) tax rates by incorporating 

Income Tax Act (ITA) Section 85 rollover allows the transfer of a proprietorship’s eligible assets to a corporation on a tax-deferred basis. This is especially useful if the assets of the sole-proprietor appreciated over time; for example, a customer list at nil cost at the beginning may have increased in value substantially by the time of incorporating.   

Without an election, the assets must be transferred at fair market value (FMV) which results in immediate taxable capital gains. Section 85 rollover allows complete or partial rollover depending on the elected amount, which cannot be more than FMV of assets transferred. If the elected amount is the adjusted cost of a property, it is a complete tax deferral.  If the elected amount is more than the cost, it becomes a partial rollover. Sometimes, partial rollover may be advantageous by triggering capital gains that help to utilize the capital losses.

If you decide to incorporate your current business, we can help you in the incorporation process in compliance with the federal and provincial requirements of legal documentation and the procedures. We have broad experience in incorporating a business in Ontario.

Contact us today to schedule a free, no-obligation, and confidential consultation to discuss your transition to corporation through most effective tax minimization strategies.

Take advantage of our free, no-obligation consultancy session and improve your financial life by learning the complexities of your tax matters and the solutions from a professional!