ldjamieson

I've just gotten a job, working on contract. They required that I incorporate. They will pay the hrs billed to them to my corp. I've just set up an ON numbered corp.Question: Am I doing this right?I was going to set this up as such:My corp gets paid. GST remitted to CRA quarterly.I'm an employee of the corp, and get monthly pay. CPP/inc tax deducted. I don't deduct EI since I own >40% of the corp. I plan on only getting paid what I need and leaving the remainder as profits in the corp, paying divs or bonus as needed. The corp will have a credit card/account separate from my own to track expenses.There is a lot of debate over employee v. subcontractor, and the CRA treats the two differently, but how? Obviously I am an employee.Am I missing something? If I go with the above plan and get a tax acct to file corp tax return year end, do my own T4 taxes, will I have a run-in with the CRA? They have a test for empl v. subcontractor, but how do I perform differently?Thanks T E. I am aware there is a difference between subcontractors and employees, but what am I supposed to do about it?Is the corporate structure I have set up the correct way to go about this to avoid trouble with the CRA? If not, what do I do instead?The company hiring the service is not going to change; they will be hiring my corp and I perform the service, hence I do all the setup work here.I assume you just copied and pasted from here?http://www.ctf.ca/articles/News.asp?article_ID=2904

TE

It seems that you consider your company as a contractor and that you yourself as an employee of your company.The CRA and the courts have used several factors deciding whether the person rendering services is a contractor or employee, including things like who supply the woking tools or equipment, if any, does the person require instructions how to fininsh the job, can the person work whenever he wants, does the person have other customers, etc. The more control that the customer has over you, the less you are likely to be a contractor (instead, should be an employee). Other issues include the following:By virtue of subsection 125(7), a corporation is considered to be carrying on a "personal services business" ifan individual performs services through the corporation,the individual or a related person owns at least 10 percent of the shares of the corporation, andif the corporation did not exist, the individual would be considered to be an officer or employee of the recipient of the services.A number of adverse income tax implications arise if a corporation earns income from a personal services business:The income is active business income and thus is not eligible for the small business deduction.Certain expenses that are ordinarily deductible will not be deductible (paragraph 18(1)(p)).Remuneration is deductible only when it is paid, not when it is accrued (paragraph 18(1)(p)).ADDITIONAL COMMENTS:If your client wants to hire your company only, you have not choice but to incorporate, although I do wonder why your client insist on hiring only your corporation. A corporation gives you the advantages of limited liability, income splitting with spouse and kids, and creditor proofing.The CRA doesn’t care whether you operate your business within a corporation or as an individual, as long as you follow the law (cdn ITA), and carry your business in a real way. As indicated in the excerpt of cdn tax foundation article, 18(1)(p) is a tax provision that you have to watch out for the deductibility of expenses.