A corporation is separate legal entity. There are both advantages and disadvantages to incorporate a business. The principal advantages to incorporating are for potential tax deferral purposes and limited liability protection.

In order to successfully claim a deduction of salaries to family members, such remuneration should be reasonable, be commensurate with the type of work or duties done by the family member, and be actually paid out. You should also remit deductions at source on such salaries where applicable.

Businesses that engage in a commercial activity in Canada, with a few exceptions, must register for HST unless annual taxable revenues do not exceed $30,000. A business can, however, voluntarily register if their annual revenues are below $30,000.

You are able to deduct home office expenses if your home represents your principal place of business or you are using a designated room/area in your home for your business and you meet clients on a regular and ongoing basis.

Business expenses must be incurred to earn business income. You cannot claim personal expenses and they cannot represent capital expenditures.

You can generally deduct 50% of the costs of meals and entertainment provided they are incurred for business purposes.

The decision depends on a number of factors such as expectant number of business kilometres you will drive, cost of car, how long you expect to keep your car, financing vs lease terms offered, your cash flow & working capital situation etc. Accordingly, it is important to analyse and quantify your situation to make a rational decision.


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