If you are presently a sole proprietor, in a partnership or an employee there are many reasons to consider incorporating your small business. Below are incorporation tips and some of the benefits of incorporating as a company.

You can significantly reduce your overall income taxes by leaving income in your corporation that will only be taxed at approximately 20%, and avoid the highest personal income tax rates of 40% to 50%.

Using the low corporate income tax rate of approximately 20%, you can retain income in your company, and use your company as a strategy to accumulate a significant retirement investment portfolio for yourself.

You may be eligible to borrow money from your company to buy a home or automobile without having to immediately declare the loan as personal income.

Upon retirement, or during a sabbatical from working, your spouse and you can receive dividends of approximately $30,000 each from your company, and if you have no other personal income, the total $60,000 of dividend income can be received as personal income tax free.

Should your IT contracting or consulting income fluctuate significantly from one year to the next, you can use your company to smooth out your personal income over two or more years, resulting in lower overall income taxes.

Your company provides you with limited liability from your corporate IT contracting work, resulting in protection of your personal assets.

Due to the increased tax audit risk from the Canada Revenue Agency (CRA – formerly Revenue Canada) , many large customers and IT staffing agencies prefer to deal only with incorporated IT contractors, and not sole proprietor IT contractors.