I have a friend who wants to help me with my contracts. We live in BC and are trying to setup a configuration that works best when it comes to taxes. What we have in front of us are the following options:
- Each of us forms a Sole Proprietorship and get paid directly by clients
- Each of us forms a SP, but I get paid by clients and then pay him for his work
- We form a Partnership
- We form a Corporation
I know option 4 has the lowest taxes. But the problem is the dividends which are essentially non-existent because we don't want to leave money in the corporation; we will want to put our after-tax earnings directly into our pockets. I know this registers as debt for the company and we will need to return this money within 3 months, so I'm not sure if incorporating a business is a viable option.
For the purpose of this question we can assume a total income of $120K for both of us.
If liability was not a concern which option would you recommend to save on taxes?