Personal vs Corporate Tax: The Deferral Gap Explained

Should you incorporate your business in Canada, or stay a sole proprietor? The answer depends on your profit, your liability exposure, and whether you plan to sell one day. In this video I walk through the three ways to structure a business in Canada (sole proprietorship, partnership, and corporation), what each one costs you, and how to tell which fits your stage. Read the full write-up: https://businessownerfp.ca/episodes/s... You'll learn: How sole proprietors are taxed, including the GST/HST threshold and CPP Why a partnership without a written agreement is a risk The five benefits of incorporating: limited liability, creditor protection, tax deferral, income splitting, and the lifetime capital gains exemption Where the corporate shield stops protecting you What shareholders, directors, officers, share classes, and minute books are A simple framework for choosing the right structure CHAPTERS 0:00 Should you incorporate? 0:44 Why business structure matters 1:12 Sole proprietorship: how it works 2:08 How sole proprietors are taxed 2:47 Advantages of a sole proprietorship 3:27 Downsides: unlimited personal liability 4:05 When a sole proprietorship makes sense 4:28 Partnerships and the partnership agreement 5:36 Incorporation: a separate legal entity 5:59 Benefit 1: Limited liability 6:40 Benefit 2: Creditor protection 7:03 Benefit 3: Tax deferral 7:53 Benefit 4: Income splitting and TOSI 8:27 Benefit 5: Lifetime capital gains exemption 9:01 What incorporation costs 9:20 Shareholders, directors and officers 10:25 Share classes: common vs. preferred 11:05 The minute book 11:30 How to choose the right structure 12:29 Get advice and review your structure KEY NUMBERS MENTIONED GST/HST registration: required once revenue exceeds $30,000 a year Small business tax rate: 9% to 12.2% on the first $500,000 to $700,000 of active business income, depending on province General corporate rate: 23% to 31% Top personal marginal rates: 48% to 54%, depending on province Lifetime capital gains exemption (2026): $1.275 million Subscribe for new videos every other week on financial planning for Canadian business owners. LINKS AND RESOURCES Financial Planning for Canadian Business Owners: https://businessownerfp.ca Woodgate Financial: https://woodgate.com Jason Pereira: https://jasonpereira.ca ABOUT JASON Jason Pereira, CFP, CFA, TEP, is a Partner at Woodgate Financial, a financial planning firm based in Toronto. DISCLAIMER This video is for general educational purposes only and is not tax, legal, accounting, or investment advice. Rules vary by province and change over time. Speak with a qualified professional about your own situation before acting. #incorporation #smallbusiness #canadiantax #financialplanning #businessowner