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