Do you know the difference between a Corporation, LLC or Partnership? Identifying the right business structure is confusing for the average person. But forming a new business in the Mississauga, ON area is much easier with the assistance of an experienced CPA, CA firm like Adian Professional Corporation, CPA, CA. We’ll explain the tax consequences related to each type of business structure and together we’ll find the best choice for your new business. Contact us at 647-715-2159 and set up a free initial consultation today to get started.
A Limited Liability Corporation or LLC is a legal form of company that can potentially allow you to protect your personal assets from the company’s liabilities. If your business is structured this way the "members" or owners will have no personal responsibility for the financial obligations of the business. With an LLC the business itself does not report taxes on its profits but uses "pass-through" taxation where the income and deductions are reported on the personal income tax returns of the members or corporate tax returns of holding companies.
There are several benefits to structuring as a Corporation, but one drawback is that the business is taxed on profits at two different points (double taxation). First when the profits are earned and again when the money is distributed to shareholder’s as dividends or salary. One positive feature is that the owners may not be held personally liable for the financial obligations of the business.
Sole Proprietorships are similar to Corporations in a number of significant ways except that they are only taxed on the profits once. The company itself does not pay taxes but the income from the company is passed through to shareholders and they are required to report any income from the business on their own personal tax returns.
As you may know, businesses operating in Ontario are subject to HST. However, the rules surrounding HST are complex and your business may or may not be subject to HST, depending on the service and product offering. Additional layer of complexity is added when your business is based in Ontario but conducting business with clients/customers, based in other provinces that are subject to PST. Contact us today to ensure that your HST and PST obligations are managed with the type of business structure best for you.