Entrepreneurship & Small Business

Post your CORPORATE TAX questions here

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[OP]
Member
Mar 13, 2013
317 posts
56 upvotes
Mississauga, Ontario…
pauli123 wrote:
Dec 23rd, 2014 7:20 am
is there any tax applicable on the property let on a rent?
You are required to report rental income and file taxes.
Sarb Cheema, CPA, CGA
Cheema & Associate Professional Corporation
[OP]
Member
Mar 13, 2013
317 posts
56 upvotes
Mississauga, Ontario…
pulkit10 wrote:
Dec 26th, 2014 7:13 pm
Probably a silly question: when you're paying yourself from a corporation, do you have to label your transactions as "pay" or "dividend" or you can do that later when filing your own taxes?
Technically speaking you don't need to label the transaction as pay or dividends. However, as @SirLookout4Deals said, if it's 'pay' you will be required to remit the source deductions.
Sarb Cheema, CPA, CGA
Cheema & Associate Professional Corporation
[OP]
Member
Mar 13, 2013
317 posts
56 upvotes
Mississauga, Ontario…
jhong88 wrote:
Dec 28th, 2014 2:06 am
I've set up a corporation in 2012 which had income up until 2014 which had $0.00 in income, however I do have some expenses that this corporation has incurred (new set up). I'm wondering, as I didn't have any income in 2014, I can't deduct these expenses, so would I be able to carry forward these expenses to 2015 when the new business launches?

Thanks
SirLookout4Deals wrote:
Jan 2nd, 2015 12:52 am
You would need to file a 2014 tax return with these expenses. This will create a loss for that year which can be carried forward and used in the following year(s) (carried forward up to 20 years) when applied to your business income.
Agree!
Sarb Cheema, CPA, CGA
Cheema & Associate Professional Corporation
Deal Addict
Sep 20, 2014
1147 posts
364 upvotes
Calgary, AB
SarbCheema wrote:
Jan 5th, 2015 11:40 am
Technically speaking you don't need to label the transaction as pay or dividends. However, as @SirLookout4Deals said, if it's 'pay' you will be required to remit the source deductions.
Yup. Makes sense, if it is pay, I'll have to set that money aside beforehand.
Thanks for the reply to you and sirlookout4deals.
Jr. Member
Dec 6, 2009
198 posts
9 upvotes
London
Hi I've got a question which I'm sure has been debated many times before.

What are the pros and cons of paying one's self through dividend or salary? My corporation has been active for 2 years now and I've been paying myself salary for that period of time.
However I recently started a new project and I'm seeing a number of colleages are all paying themselves via dividend; they don't do any salary.

Unfortunately when I ask them about it all I get is "oh that's how my accountant set me up" I've tried to discuss this with my own accountant but he's very conservative and he says I should stick with salary.
Member
Jul 4, 2012
360 posts
25 upvotes
Calgary
If I sold my company, including all assets, I need to file the last return after the sale. Do I show the assets on my books?
Deal Addict
Sep 23, 2007
4157 posts
671 upvotes
I am working with a friend to start a corporation. This corporation will be partly owned by a foreign corporation. So currently we plan to have 3 shareholders: A - Foreign corporation own 50%. B - My friend will own 25% C- I will own 25%. My friend and I are Canadian residents. When we cite these %, these are the ratios that we want to share profits and costs. We plan to make all major decisions jointly.

My questions:

1) About CCPC: I want to make sure we are considered as a CCPC so we can take advatange of lower tax rates. Does the above structure make us a CCPC and what factors might change that?

2) Related to CCPC question above. We're thinking of issuing two classes of shares A & B. A class is strictly for dividend payment to share profit and B class is for voting rights. My question is if we change the ratios such that the foreign corporation will take 60% of class A shares, and 50% of class B shares, is the corporation still a CCPC? The 3 shareholders want to make decisions jointly (3 people must consent). Is it necessary to have 33% of class B shares each person? Any advice for or against this idea?

3) We will split the after tax profits by dividends. So dividends will be paid to a foreign corporation. We'll also pay a royalty perhaps weekly. I understand that there's a withholding tax on royalty and dividends to non-residents. But what if we buy equipment or some rights from the foreign corporation? Do these have withholding tax as well?

4) Any other tax issues regarding having a foreign corporation owning a part of our company? I consider myself pretty well versed in "Canadian" taxes for small businesses but having a foreign entity is new to me.

I understand my questions are probably more complicated. A generalized answer will be good. I'm not going to hold you accountable. We will likely get professional advice but right now at the planning stage we don't want to spend the $$$. And if you can give me generalized answers and advice now, I might retain your full professional services when we actually put things in motion. And of course I'll really appreciate it.
Member
Aug 17, 2008
447 posts
171 upvotes
Quebec
nabilbb wrote:
Jan 9th, 2015 11:31 am
If I sold my company, including all assets, I need to file the last return after the sale. Do I show the assets on my books?
you sold the company (your shares) or the company's assets?
Member
Aug 17, 2008
447 posts
171 upvotes
Quebec
BananaHunter wrote:
Jan 9th, 2015 4:48 pm
I am working with a friend to start a corporation. This corporation will be partly owned by a foreign corporation. So currently we plan to have 3 shareholders: A - Foreign corporation own 50%. B - My friend will own 25% C- I will own 25%. My friend and I are Canadian residents. When we cite these %, these are the ratios that we want to share profits and costs. We plan to make all major decisions jointly.

My questions:

1) About CCPC: I want to make sure we are considered as a CCPC so we can take advatange of lower tax rates. Does the above structure make us a CCPC and what factors might change that?

2) Related to CCPC question above. We're thinking of issuing two classes of shares A & B. A class is strictly for dividend payment to share profit and B class is for voting rights. My question is if we change the ratios such that the foreign corporation will take 60% of class A shares, and 50% of class B shares, is the corporation still a CCPC? The 3 shareholders want to make decisions jointly (3 people must consent). Is it necessary to have 33% of class B shares each person? Any advice for or against this idea?

3) We will split the after tax profits by dividends. So dividends will be paid to a foreign corporation. We'll also pay a royalty perhaps weekly. I understand that there's a withholding tax on royalty and dividends to non-residents. But what if we buy equipment or some rights from the foreign corporation? Do these have withholding tax as well?

4) Any other tax issues regarding having a foreign corporation owning a part of our company? I consider myself pretty well versed in "Canadian" taxes for small businesses but having a foreign entity is new to me.

I understand my questions are probably more complicated. A generalized answer will be good. I'm not going to hold you accountable. We will likely get professional advice but right now at the planning stage we don't want to spend the $$$. And if you can give me generalized answers and advice now, I might retain your full professional services when we actually put things in motion. And of course I'll really appreciate it.
im not a fiscalist but heres a quick answer

1. You are a CCPC since the foreign corp doesnt control the corporation.
2. Again if the foreign corp doesnt control i dont see any problèms if they get more than 50% non-voting shares
3. No tax for Equipment sale/purchase between the companies
Sr. Member
Jul 30, 2008
775 posts
16 upvotes
Sarb,

I have been working out of a home office for a few years for a Corporation that I am an equal share owner for - it's my after-hours job, and I put in way more than 40 hours a week in it, so I hesitate to call it a part-time job. The other shareholders work full time during the typical 9-5 hours, and work at the office that the business rents. I live in a Bachelor Apt, so the % of the home that is the office is larger than most people's.

I didn't know I could claim part of my rent, internet, electricity until this year. Also, I drew no regular income for years (I was always paid out with dividends). The first time ever, I got a lump sum managerial bonus payment in 2013, that is counted as regular income for the 2014 year. I plan on claiming a portion of my rent, electricity and internet using the T2200 tax form to bring my personal taxes down.

My question is, even though I was not an official employee (given that I received no salary) in previous years, can I still claim my rent, electricity and internet for previous years?

Secondly, since the 2013 bonus is claimed as income in 2014, can I at least claim the 2013 and 2014 rent, internet, etc?

I have not been able to find the answer to either of these questions on the CRA website, since it's pretty unique that you work for years, and the business accountant claims I can only claim the 2014 year, though my feeling is I should be able to claim more than that...at the very least I should be able to claim both 2013 and 2014 expenses. Do you have any links you can refer me to that would be able to help me with this issue? I think it's a unique scenario where someone works for years for a company while getting zero salary income while using his home for a home office, and then starts getting salary (in the form of a managerial bonus).
Member
Jul 4, 2012
360 posts
25 upvotes
Calgary
sr79 wrote:
Jan 9th, 2015 9:01 pm
you sold the company (your shares) or the company's assets?
Everything assets and shares, but didn't get the money yet, it is to be paid monthly

do I do
Asset = 0
AR = Sale price?
Sr. Member
Oct 6, 2014
929 posts
36 upvotes
Toronto, ON
If my wife works for my corp (that I 100% own), should she be paying for EI? I heard that she will never be able to recoup those EI money even if she gets laid off one day due to direct relationship? Thanks
[OP]
Member
Mar 13, 2013
317 posts
56 upvotes
Mississauga, Ontario…
letmesee wrote:
Jan 13th, 2015 9:52 pm
If my wife works for my corp (that I 100% own), should she be paying for EI? I heard that she will never be able to recoup those EI money even if she gets laid off one day due to direct relationship? Thanks
That's correct. Don't pay EI because she cant collect EI.
Sarb Cheema, CPA, CGA
Cheema & Associate Professional Corporation
[OP]
Member
Mar 13, 2013
317 posts
56 upvotes
Mississauga, Ontario…
nabilbb wrote:
Jan 13th, 2015 6:23 pm
Everything assets and shares, but didn't get the money yet, it is to be paid monthly

do I do
Asset = 0
AR = Sale price?
If you sold the shares of the corporation...you will get a capital gain or loss. The new owners will file the tax returns for the corporation.

If you sold the assets, you still own the share of the corporation. You will have report the sale with amounts as A/R.
Sarb Cheema, CPA, CGA
Cheema & Associate Professional Corporation
Deal Addict
Feb 5, 2010
2765 posts
173 upvotes
Hi, would like to confirm how this tax credit works for hiring a co-op student for 12 weeks.

Co-operative Education Tax Credit
http://www.fin.gov.on.ca/en/bulletins/c ... html#qlfyg

I fully understand the eligibility, calculation etc. I want to confirm if this credit is in addition to deducting the wages of the student.

So in other words:

1. Deduct the wages of the student just like employee wages,
2. In addition to #1, you calculate the credit and claim it.

Am I correct?

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