PSB Hazards When Providing Services Through A Corporation

An individual who provides services may choose to incorporate for commercial or tax advantages. Depending on the circumstances, significant tax efficiencies can be gained by incorporating. These benefits include income tax deferral by earning and reinvesting business income through a corporation, preferential corporate tax treatment such as the small business deduction (SBD) for a Canadian-controlled private corporation (CCPC) earning active business income, the potential to utilize rollover provisions designed to defer the taxation of gains, income splitting (subject to TOSI rules and shareholder benefit restrictions), and other incentives such as the lifetime capital gains exemption (LCGE).¹