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My question is: Canadian-specific
QUESTION: I would like to start buying, renovating and selling houses one at a time, hopefully for profit. I don't know if I should operate under a business or as an individual. How should I set up my business structure to minimize my personal liability and taxes?
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david ingram replies:
As an individual you can operate at low cost as a renovator by just geting a GST Number and a PST numbr (asuming you are not in Alberta and registering with Worker's Compensation and likely with the Home Protection Office if in BC.
As an individual who needs the profits to live on, you will not save any money by incorporating. In fact, if the principal members of the corporation want to spend the money on themselves and their families, having a corporation is usually a slightly higher tax rate and a whole bunch more of legal and accounting expense.
If you are a proprietorship, you will find it easy to make your own mortgage tax deductible if it is not already. As a corporation, this is very difficult.
This is not the venue for this kind of question. It is too individual because there is no silver bullet. Your personal situation will govern the method used to account for your business. I and many others would be glad to consult with you.
Be wary of anyone who says you should incorporate if you are the only main person in the operation. A Corporation will hamper your style, although, I will be the first to admit that if there are partners, a corporation does give some protection for one partner against the actions of the other partner.
A corporation does not protect a one person operation against many lawsuits because yiou as the officer, director, manager or person who drove the backhoe which ruptured the gas line, are responsible in your role as driver, director or manager for you actions and sometimes for the actions of the corporation.
Corporations do not protect a one person business from very many lawsuits.
Answers to this and other similar questions can be obtained free on Air every Sunday morning.
Starting this Sunday at 9:00 AM on 600AM in Vancouver, Fred Snyder of Cartier Partners and I will be hosting an INFOMERCIAL but LIVE talk show called "ITS YOUR MONEY"
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