The Dilemma of Incorporation

Real estate investors, you might wonder whether it’s worth transitioning from sole proprietorship to incorporation. Do you spend the money to incorporate your business and bear the expense of hiring an accountant to file your corporate income tax return every year? Or do you save these fees and continue operating as a sole proprietor?

First, consider that the following apply to any business other than a Specified Investment Business or a Personal Services Business:

To start comparing, look at the tax breakdown for sole proprietorship vs. incorporation:


Gross annual income: $120,000Revenue: $120,000
Total deductions: $34,460Incorporation fees: $1,200 (one time)
Net of taxes: $85,540Accounting fees: $1,200
Savings: $10,000Corporate taxes (15.5%): $18,228
Life insurance: $1,200*Corporate income: $99,372
Net disposable income: $74,342Net of taxes: $87,272
Company retains $13,000


* More on life insurance below

Also, incorporated can take advantage of income splitting:

But remember…

Getting back to life insurance—why is it so important? A universal or whole life insurance policy…

So, it’s in your interest to fund a life insurance policy as soon as possible with the extra savings available by incorporating.

Here are some key points to help you weigh your options:

Better access to funding

Save money on accounting feesInsurance for liability protection

Potential losses against your personal income

Lower taxes via income splitting

Limited liabilityCarry forward losses

Having to hire a creative mortgage professional


So long as you understand what will work best for you, and you develop a solid plan, you’ll be on the right track.

Questions? The CPAs at and your Professional Mortgage Advisor at will be happy to help!

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