In my I made over $100,000 in 2007 post from last week, I mentioned how I was finally taking the steps to incorporating, and had made an appointment with a corporate lawyer.
I met with the corporate lawyer on Monday, and he went over the basic pro’s and con’s of incorporating just like my accountant did, but he went into a bit more detail with how I would be paid.
While he did a good job of explaining the basics of corporate accounting and money management, I still felt that there was a lot of information that went straight over my head. There are just so many simple things such as basic corporate and accounting jargon that I simply don’t know.
Therefore, I’m thinking of ordering a half-dozen books on corporations. There are certainly a lot out there, as an Amazon search proved. However, I’m very particular when I buy books, especially non-fiction. I like them to be up-to-date, not overly complicated or obfuscated, yet not overly simplified either.
But what’s most important, in this case especially, is that the books are directly relevant to me. I am Canadian; I live in Canada. Most of these books (if not all) are American, and are written for the American citizen and corporation. Thus, a lot of the information does not pertain to me. Sure, there is probably still a lot I could learn from them, but I hate learning things where I’m not sure if they are applicable to me or not.
What I need is a book for the absolute beginner engaging in incorporating. A book that gives a bit of history of the corporation, explains basic definitions such as dividend and retained earnings, and explains how a corporation functions and how it differs from a sole proprietorship.
I’m learning bits of these things as I progress into this uncharted (for me) territory, but it’d sure be nice to know a lot more, as it’s very uncomfortable not knowing exactly what’s going on.
Anyhow, getting back to my meeting with my lawyer… after finishing our discussions, I left the law offices with my only task being to contact the Canadian Revenue Agency to ask them if I need to register for GST or not.
I won’t get into the details here as they’re not particularly interesting, but my corporation will be registering for a GST number. What this means is that I’ll have to charge a 5% GST fee(Government Sales Tax) when I receive income from Canadian residents. 99% of my income comes from the US or other countries though, so this added hassle isn’t too bad; I probably earn less than $400 a year from Canadian residents and businesses.
The corporate tax in Canada is 15.5% up to $400,000.
Compare this to what I would have to pay as a sole proprietor for 2008:
- $9,200 to $35,016 – 20.24% (Edit: I forgot that the first $9,200 is tax-free. Thanks John)
- $35,016 to $37,885 – 22.98%
- $37,885 to $70,033 – 29.98%
- $70,033 to $75,769 – 32.50%
- $75,769 to $80,406 – 36.50%
- $80,406 to $97,636 – 38.29%
- $97,636 to $123,184 – 40.70%
- $123,184 and greater – 43.70%
In fact, I’ll have to pay these rates for my 2007 taxes. I don’t know exactly how much I’ll have to pay since I didn’t calculate all my expenses. My accountant should be breaking the news to me shortly after I give her my a copy of my second RRSP contributions letter, but I’ll most likely reach the 38% tier. Compare this to the 15.5% that my corporation will be paying for 2008, and you can see why I badly needed to incorporate.
Anyhow, when I woke up this morning, I listened to a voice mail from my corporate lawyer. They successfully reserved my corporation name of “Merendi Networks Inc.”, so it’s confirmed that I’ll get to use that name 🙂 It’s all mine now! I’m an Inc.!
However, my corporation hasn’t been set up completely yet. My lawyer is going to talk to my accountant about a few more things first, and then they will finish creating the paperwork. This will probably be done tomorrow, at which point I just need to go in and sign the papers. After that, it should just be a matter of a couple hours before my corporation is born.
Now I get to do all the fun stuff such as getting a professional logo for Merendi Networks Inc. and stationary made up 🙂