INCORPORATING as an INDEPENDENT CONTRACTOR
To schedule an appointment, contact our law firm at 403-400-4092 or Chris@NeufeldLegal.com
Whether it is for purposes of securing a particular work assignment, which requires that you are an independent contractor, or you are looking to structure your personal business to optimize the tax advantages realizable through incorporating, incorporating as an independent contractor has its specific requirements and considerations. And even though it may appear as a relatively straightforward process, there are important considerations that should be addressed when incorporating as an independent contractor, both specific to the incorporation itself and the interconnected business arrangements that are being undertaken. And those interconnected business and legal considerations tend to be specific to the individual business circumstances of the independent contractor, which can benefit from drawing upon the legal insights and strategic perspective of a corporate business lawyer, with over 25+ years of legal experience working with businesses from New York City to Toronto, Ontario, and now in Calgary, Alberta.
Operating as an independent contractor entails a distinct pay arrangement (as compared to an employee), which also imposes specific responsibilities on the contractor [more on pay arrangement and responsibilities]. With respect to commonly attainable benefits and advantages that can be realized through incorporation by an independent contractor, these include:
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Limited Liability Protection: Incorporating creates a separate legal entity, shielding your personal assets (like your home and savings) from business debts and lawsuits [more on limited liability].
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Tax Advantages: Corporations in Alberta are subject to a lower corporate tax rate, especially for the first $500,000 of active business income, known as the Small Business Deduction. This allows you to potentially defer personal income tax by keeping profits within the company and only paying yourself what you need [more on tax advantages].
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Demonstrated Readiness: When you are seeking work as an independent contractor, having an incorporated company, which is properly structured and has its corporate tax identification number and other registrations completed (or being prepared to do so immediately with an experienced corporate lawyer), instills confidence in the hiring company that you know what you are doing and are prepared to proceed expeditiously [more on demonstrates readiness].
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Income Splitting (Legitimate Profit Distribution): Although the government may have justifiable concerns as to the improper distribution of income to related persons to minimize personal income taxes, undertaking the legitimate distribution of corporate profits as income, dividends or other forms of profit distribution, is entirely within the scope of legitimate corporate and tax planning [more on income splitting].
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Perpetual Existence: A corporation's existence is not tied to its owner. The business can continue to operate even if ownership changes, simplifying succession planning and the transfer of the business [more on perpetual existence].
Yet, beyond these commonly attainable benefits and advantages that can be realized through incorporation by an independent contractor [why companies hire incorporated independent contractors], there are individualized aspects and opportunities that should be considered when undertaking the incorporation process and advance your business as an independent contractor [also consider the proposed independent contractor agreement]. For an experienced business lawyer capable of provide you with such legal support and strategic direction, contact our law firm at Chris@NeufeldLegal.com or 403-400-4092 to schedule a confidential initial consultation.
