Thread: GST Question
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Old 05-22-2019, 08:03 AM
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MoFugger21 MoFugger21 is offline
Join Date: Nov 2009
Location: Southern Alberta
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Originally Posted by defino View Post
Thanks for all the info and replies itís appreciated, I will look into what I have to do for registration as I will my business number first then I am able to register for a GST number from what I understand. Just not sure if I should go sole trader route or incorporated having not done it before in Canada itís all new to me.
There a number of reasons to incorporate your business (multiple people/partners/shareholders, insurance or liability reasons) but if you will personally need/withdraw all the net profits out of business, there is no benefit for tax purposes. And generally, incorporation will cost you more year after year than being a sole proprietor (corporate financial statements, corporate and personal tax returns, corporate annual return and lawyers fees, etc).

The benefit of incorporation for tax purposes comes from the deferal of paying personal taxes to future years, but if you withdraw everything personally, there is no deferal available. The example I give people is if the business nets $30,000 profit and they need that $30,000 in their hands personally, it will make little difference in combined taxes whether they are incorporated and pay $30,000 salary/dividends, compared to netting $30,000 as a sole proprietor and already having the net cash in their hands. Now if you net $150,000 and only need $30,000 personally, that's where the benefit of incorporation comes from, because you can defer paying personal taxes on the remaining $120,000, whereas a sole proprietor pays tax on the full $150,000 in that year.

So generally, unless you have a liability or insurance reason to incorporate, or anticipate earning more profits than needed in any given year, operating as a sole proprietor is usually more cost effective.

As far as GST registration goes - once you reach $30,000 gross income you are required to register, so if you think you will get close to that figure, you might as well register before beginning operations.

In your situation, with the large cash outlay and large GST expense, you're correct in your thinking in recouping that cost, so you're better off registering before hand and claiming that cost back.
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