Recently, we kicked off our first 2024 initiative: our Community Conversations, where we practice convening our community on topics that are emerging and require more than a question and an answer. In each Community Conversation, we’ll bring in different voices with different lived experiences to share their expertise and gifts with us so we can all do our work better.
Recap: Incorporation vs Sole Proprietorship
The first of many Community Conversations was hosted on Jan 10th and centred around the differences between incorporation and sole proprietorship, with special focus on independent consulting.
We were honoured to host a panel featuring Network Member Ilnam Kim, CPA who shared some examples of potential tax implications, alongside insurance and legal experts, Mario Montagliani of Axis Insurance Managers Inc. and Christine Holmes of LawyersInHouse.com.
While the entire session was packed with valuable insights, we’ll share five of our key takeaways:
Incorporation can be a tax saving tool. Chat with your tax accountant regarding strategies, especially if you are a solo consultant; you may hit an income threshold that may make incorporating a good tool to maximize on your long term wealth strategy.
When you incorporate, your business is its own separate legal entity, meaning it is responsible for its debts, not you. This may sometimes shield your personal assets from some business-related liabilities (not all!).
It is always valuable to have an insurance policy, e.g., Errors and Omissions + Directors & Officers Liability. You may need to have support from activities you may not be in the wrong for, but once you take on customers, you don’t have control over their potential frivolous claims. Having insurance will ensure you have a partner in these moments.
While it may be more strategic to incorporate, it will be more work than only doing your personal taxes. Once you hit an income level of over $100K, it’s probably a good idea to take a look at whether becoming incorporated is a good idea.
Incorporation is great for some, not for all. Every business is different. Make sure to get your own personalized advice from experts on insurance, legal and tax matters before deciding.
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