As summer approaches us, many of us are trying to get into the construction contracting industry. Contracting is easy in Canada, and it is a matter of following certain guidelines.
The first question comes to mind is that should I incorporate a business or do a business registration such as a trade name or Master Business License (MBL)?
There are certain advantages and disadvantages to choose either to incorporate or do a business registration.
One of the biggest advantages of doing an incorporation is that incorporating provides the owner with limited liability. For example, if you are sued by a company, the liability would only be limited to the portion that is owned by your corporation. Any personal assets will not be liable in this situation. The corporate veil protects your personal assets such as housing or any property that you personally own. Another advantage is that the ownership of a corporation is easily transferrable. Suppose, you want to partner with a friend on providing services, you can add your friend as a director of the corporation with limited shares. This would mean that your friend would have part ownership of the company if they were designated as a “Director. “
One of biggest pitfalls of a corporation is that the tax structure is not simple as a business registration. A Master business License (MBL) or Trade Name synchronizes your personal tax account into one unit. This means that the business is synced with your personal assets, and you would only have to do taxes once. As opposed to a corporation, you would need to do tax separately for the corporation and your personal income tax would be a separate tax filing than the corporation tax. The blending of personal taxes for MBLs and trade names are an advantage as it gives you the flexibility to run your business simply. If you file your own taxes, then this type of license would be an advantage for you.
Moreover, for registered contracting workers, you can do either of the license. Both licenses would give you the ability to obtain a business number and a HST account number. These numbers are required by the client when you are invoicing your customers for payments rendered for services that you provide.
For more information, please reach out to us. We will be happy to assist you.