# Small Business Corporation



## jignesh (May 13, 2016)

1) Is Small Business Corporation and Small Business same thing OR are these two different things ?

2) How can one get Small Business Corporation designation ? If a business is getting registered, is there a form to declare one as small business ? 

3) Since small business offers lower tax on first 500000 net income, why would one not declare itself as small business ? Are there any disadvantages of declaring one as small business ?

4) If taxable capital is less than $10 million, then a business can be small business, thats what I read online. What is meant by taxable capital ? When someone starts a business, he uses his own capital, which is tax paid OR borrowed. How can capital be taxable ?

5) In other provinces, when taxable capital reaches $10 million, tax benefit starts reducing and it becomes zero, when taxable capital reaches $15 million. But in Ontario, there is no reduction in benefit. Does it mean that up to $15 million, business owner keeps getting benefit. But is upper limit of $15 million still remains same OR does that limit change in Ontario ?

Please answer all questions instead of pointing to links because I am confused with online reading.

Thanks


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## Just a Guy (Mar 27, 2012)

There are sole proprietorship, and incorporated companies.

With a sole proprietorship, any money you earn is added to your personal income, any qualified expenses can be written off against your income.

Thus, many people who have a fairly large income, start with a sole proprietorship (when they have startup losses) for the tax benefits.

Once the company starts to make profits, it usually makes sense to incorporate for tax reasons. As the income is taxed lower than the personal rate, and there are other ways to take money out of the company at a reduced tax rate.

Once you are incorporated, there are various tax benefits depending on the size of your corporation. I believe the size of your corporation is based on the number of employees you employ or a certain amount of income you generate. So, let's say you have only five (or less, I'm not sure the exact number, that's why I have an accountant) you can benefit from the small business tax credits, same would apply if the income you generate stays under the 10M threshold you quoted. Once you pass the threshold, those benefits disappear for you, but other ones open up.

You don't get to "declare" what kind of business you are, you just are that kind of business based on your operations.


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## Eclectic12 (Oct 20, 2010)

Since links are out of the question, the responses will be limited.



jignesh said:


> 1) Is Small Business Corporation and Small Business same thing OR are these two different things ?


Small business corporation means the business is incorporated whereas a small business can be a sole proprietorship or partnership, without incorporating.

For example, my sister-in-law did not incorporate her hair dressing salon where she and her friend started the salon as a partnership (split 50/50 in terms of startup money and splitting profits). Then when her friend became sick, she bought her friend out of the business. At that point the partnership had become a sole proprietorship as she was the only owner.




jignesh said:


> 2) How can one get Small Business Corporation designation ? If a business is getting registered, is there a form to declare one as small business ?


Incorporate ... which comes with all the decisions (what jurisdiction to register under, what name plus is the name available, decide on structure then draft the articles of incorporation to match, file the paperwork plus pay fees to the gov't authority, setup the legislated records, setup the operational requirements as needed such as a federal business number/provincial sales tax account etc.

Once in incorporated and in operation, the corporation has to met the deadlines for the required filings, notifications of share transfers etc. that are legally required of corporations.




jignesh said:


> 3) Since small business offers lower tax on first 500000 net income, why would one not declare itself as small business ? Are there any disadvantages of declaring one as small business ?


The way I read the links I have seen in the past, the small business has to be incorporated to get the tax advantages. My sister-in-law as a non-incorporated small business was filing regular taxes (i.e. one tax return for her personally *and* the business).

The disadvantages to incorporation include (but may not be limited to) higher setup/administrative costs, a more complicated structure, more administrative work (shareholders file their personal tax return and the corporation files it's own tax return) and business losses can't be written off against other income of the owners (i.e. the shareholder's other income).

In addition to the tax advantage you have noted, liability is limited where generally the shareholder's personal assets are protected, there is an $800K on the sale of shares of a qualifying small business corporation and the tax treatment for providing private health services plans to employees is better.




jignesh said:


> 4) If taxable capital is less than $10 million, then a business can be small business, thats what I read online. What is meant by taxable capital ? ...
> 5) In other provinces, when taxable capital reaches $10 million, tax benefit starts reducing and it becomes zero, when taxable capital reaches $15 million ...


I haven't seen references to this so unless someone with experience posts a response, you are on your own.

I would offer to read through the links that you have that refer to this but since you have requested links be avoided, I don't see the point of reviewing your links.


Cheers


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## OnlyMyOpinion (Sep 1, 2013)

jignesh said:


> Please answer all questions instead of pointing to links because I am confused with online reading.
> Thanks


It is tough to answer in any detail without pointing you to relevant links or making you read online.
I usually offer some of my experience or opinion on CMF but I also assume that most people who are looking for a definitive answer appreciate links that are more authoritative and provide greater depth than can be provided in a posted response.


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## tygrus (Mar 13, 2012)

OnlyMyOpinion said:


> It is tough to answer in any detail without pointing you to relevant links or making you read online.
> I usually offer some of my experience or opinion on CMF but I also assume that most people who are looking for a definitive answer appreciate links that are more authoritative and provide greater depth than can be provided in a posted response.



This guy is asking some strange questions. Maybe he just doesn't really understand the rules but in another thread he wanted to 'declare' his home worth $10MM and now he wants to 'declare' himself a SBC with $500k in income and $10MM in capital. Weird...


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## OnlyMyOpinion (Sep 1, 2013)

Maybe OP just wants us to answer their assignment or test questions for them?


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## jignesh (May 13, 2016)

OnlyMyOpinion said:


> Maybe OP just wants us to answer their assignment or test questions for them?


I am studying appraisal and there I come across these terms. When I dig deeper, I don't find clear cut answers. So process to find answers to even small questions becomes tedious and lengthy. So I prefer some definitive answers. Most of my questiuons are for academic purpose and not assignments. Actually, I am doing more work than required for my assignments. 

Thanks for replies.


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## OnlyMyOpinion (Sep 1, 2013)

Well its a time saver, even the rote approach to learning ("just give me the formula or steps to get the right answer") is more work than "just give me the answer". Its certainly a far cry from thinking for one's self and actually trying to understand the subject.

Reminds me of this article from last year:
_Family/friends climb the wall of school to give students exam answers_
View attachment 10329


http://www.cbc.ca/radio/asithappens/as-it-happens-friday-edition-1.3003183/indian-parents-scale-building-to-help-kids-cheat-on-exam-1.3003755


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