Friday, 25 January 2013

Advantages of Incorporating a Business or Practice

January 23rd
Radio Shalom 1650AM
Money and Business show host Samuel ezerzer

Money, Money and Business
You started a small computer software business a few years back as a sole proprietorship with 7 employees. 
Demand of your services and software was so great that you kept hiring more people and taking on debt to purchase more equipment, and the number of customers has soared.
But lately you've started to wonder:

What happens if business slows down and you can't pay back all the debt?
What if a disgruntled employee or unhappy customer sues you?

As a sole proprietor you're personally liable for any bad debts and legal judgments against your business, Meaning that your home and other personal assets are at risk. Thus when you incorporate, you're creating a completely separate legal entity, one that shoulders the liability burden you had been carrying yourself.

Also reducing income taxes is generally the most appealing reason as to why businesses incorporate.
While this item can be quite complicated and professional advice is always recommended, today live from the studios of radio shalom business headquarters.
Our topic of the show today is the advantage of incorporating a business or practice. With me today I have Michael Martella, who is a Financial Securities Advisor. He has worked for several Financial Institutions in Montreal and has a specialty on taxation and estate planning, primarily for corporations, professionals and high net worth individuals.

My name is Samuel Ezerzer, your host to the Money & Business show on Radio Shalom, CJRS 1650 AM. Thank you for tuning in live with our Business studios headquarters in Montreal, the financial capital and the home to the greatest hockey team, the Montreal Canadians. We have another great show for you today and as always, you can call if you have any questions, comments, or criticisms on today's topic. Please call us direct at514 738 4100 ext 200 or email me at if you have any inquiries. You can also visit our website at– all our shows are archived there. 

In his strongest warning to Europe yet, British Prime Minister David Cameron said Wednesday that he planned to hold a referendum on whether the United Kingdom should remain in the European Union by the end of 2017.
"I don't just want a better deal for Britain," David Cameron said in his sharply critical and long-awaited speech on London's future relations with Brussels. "I want a better deal for Europe too." He went on to describe major challenges, including high debt, a lack of competitiveness and the people's diminishing trust in European institutions. The union, he argued, must urgently be reformed.


Promise: The PM pledged to hold a referendum on Europe



 (Photo: H. Darr Beiser, USA TODAY)

 Michael Martella

Michael Martella, Financial Security Advisor and Mutual Funds Representative.
Offers financial advice to his clients and specializes on tax, estate,
trust and investment planning; primarily for corporations,
professionals and high net worth individuals. Daily contact with
notaries, accountants, fiscalists and corporate attorneys for client

Michael Martella


Michael Martella his role as an advisor is very simple; to improve and protect his client’s financial situation using all possible programs, laws, products, accounting techniques and services available, he entered his
profession in 1998 and shortly afterwards became a Corporate Account Manager at one of Canada’s largest Banks.In 2005 he was contacted by Power Corporation and offered a Senior Consultant Position.  This opportunity allowed him to offer my clients more choices with regards to investments, insurance, mortgages and tax plans.It allowed Michael Martella to offer his clients the best products available and not the best product connected to my specific Bank.   

 The Majority of my clients consist of Private Canadian or Quebec Corporations to which I save thousands of tax dollars every year. I do not replace your accountant, nor do I charge you by the hour. Furthermore my services are complimentary to any financial advisor you currently have.

What I offer my clients is a technique authorized by the Canada
Revenue Agency granting them access to corporate dollars tax free, for Personal use.


I was talking with a Med student the other morning, I've known him for
several years, nice young man, a dentist. He recently started a
practice and is now considering his options. As a dentist starting his
practice it’s a business of its own and what a lot of practitioners
don’t know is that they are allowed to incorporate their practice.
What you have to realize is that a lot of doctors are aware about this
but they are not informed about how to go about it.


Worth While Incorporating your business?

  • Under the circumstances where a certain profit margin has been met and will be met that is above and beyond what the person requires to live on a regular basis. IE: profit that is left over to the business after expenses and salaries.

Is it beneficial?

  • If the conditions above are met then absolutely, the fees are negligible

What is the process of incorporating?

  • Cash flow analysis
  • Needs analysis
  • Visit with a tax attorney and accountant to decide the type of incorporation
  • The help of a financial advisor

What changes with respect to future estate planning?

  • Estate planning takes on a whole new view, the corporation may hold some insurance policies within the incorporation and will open a new door to estate / retirement planning.

Can your kids or spouse own shares of the company?

  • Some shares yes, other shares no, certain companies yes, other companies no. Medical practices for instance is an automatic no, however the spouse and children may own shares of the holding company, which may be part of the corporate structure.

What happens in the event that your spouse owned shares and a divorce comes about?

  • It is problematic, a corporation is not a way to hide or protect assets from neither creditors nor a broken marriage.

Owning your own business, what happens at retirement? What happens if all of your funds and life savings are in your company?

  • There are ways to grant you access to corporate dollars and an advantageous tax rate. For example private pension funds or pension plans, held within the company.
  • Unfortunately this is a good problem to have.

If you decided to become a partnership after you have incorporated, as far as retirement is concerned, how will things work then?

  • Partnerships are a little more complicated and need to be put into place from the beginning; the best options are to use holding companies to differentiate the assets of each partner.

What happens when you approach retirement and choose to wind your company down?
  • If the company is sold you do have a capital gains exemption of 750,000$ for qualified assets. In many cases you will be allow to cash out 750,000$ tax free, anything beyond that is taxable.
    • Unless it is left within the company or the parent holding company, making it non taxable
      • At which point we have methods to extract it by passing primary tax rates.

Who should consider incorporating, just doctors or people that have practices?

  • Doctors, dentists, real estate agents
  • Small – medium sized businesses that are not already incorporated.
  • Individuals that have multiple sources of income
  • The key is people that have profits and do not require all of them for their personal use
    • For tax purposes they will be able to save their funds within the corporation.