Although I myself am not running a business like this. I do know many that are.

But clearly one major advantage is not to be paying the government income tax the minute you get paid. The longer you postpone parting with your hard earned money the better. You can invest it and pay the taxes at the end of the year. As a full time employee, if you are constantly overpaying your taxes and thus get a refund at the end of the year, you can have your HR people have the income tax amount adjusted on your pay. However, through the excess paperwork involved the good old cdn gov makes this virtually an impossibility and don’t even think about removing the tax deduction completely on your pay in the hope to pay it at the end of the year.

From what I hear many are able to virtually eliminate paying income tax completely or at least no more than 20% by creating a corporation. But with everything who knows if the CRA will come calling years done the road. Your only saviour is the time limitation they have to reassess your return.

If you want to be creative hire your low income family member as well to reduce overall income tax %.

I have to caution people about creating a small business
corp. It doesnt help you avoid taxes in the traditional sense. Sure you can write-off things like vehicle, cell phone, computer, office supplies, but make sure you’ve used them substantially for work lest the CRA come calling. The problems hit when you try to pull money out of the corporation. Its either a wage or a dividend. Wages of course are taxed as such, and dividends taxed in such a way that the corporate tax plus the dividend tax equals the wage tax. The biggest advantage I’ve found so far is the ability to smooth out the business cycle by pre-paying tax at a lower rate and creating a shareholders loan. And be prepared to pay an accountant and lawyer about $2K per year for the baggage that comes with it.

Anyone can start a corporation for $100 or so. There is no requirement for the number of employees.

Anyone can work on a contract bases under your corporation and if corporate taxes go to 0% you will definintly see a flood of people going this route as a tax haven. Actually they already are now with the corporate tax dropping as it is. Purchase everything you can through your business and pay yourself as little as possible to keep all your business earnings in your corporate tax shelter.