How to Save Thousands on Taxes Using Incorporation Strategies. (#108) — Transcript
Updated: Oct 26
THE PICTURE OF WEALTH · EPISODE 108
Dustin Serviss discusses when incorporation may make sense, the costs of maintaining a corporation and the tradeoffs of retaining earnings. This is part three of his financial wellness miniseries.
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This transcript was generated from the episode audio and lightly edited for readability. It may contain transcription or speaker-attribution errors. Refer to the recording for exact wording.
Chapters
[00:00:03] When incorporation may make sense
[00:00:44] Savings and corporation costs
[00:01:24] Financial statements and tax deferral
[00:02:00] Student loans and incorporation
[00:02:34] Corporate cash flow
[00:03:08] Paying yourself what you need
[00:03:41] Keeping savings inside the corporation
[00:04:13] Making intentional decisions
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Transcript
[00:00:03] Dustin Serviss: Welcome to mini series episode three, how to save thousands on taxes using incorporation strategies. And now that we've got sort of a base foundation, a lot of work. And again, you know, how do you use them? Ways to save tax. Should I get one or should I wait? You know, I'm just kind of rattling off some questions that might be going on in your mind. Here's some rough rules of thumb. Because I often get called or asked, you know, clients to say, hey. I read an article. Should I be incorporated? So reasons that you would incorporate, I usually say, if you're making income higher than one fifty,
[00:00:44] Dustin Serviss: if you're able to save more than twenty thousand a year... So, again, a person who is a sole proprietor or an employee making one fifty a year who's saving twenty thousand a year, you might be definitely a good candidate for it. And the reason is is that a corporation... Again, and I... You're all across the country, so it's varying prices. But to have one corporation, it costs probably between two and three thousand a year. Some of your solicitors could, you know, do your own annual filing. For me, I pay five hundred, six hundred dollars a year just for them to do the filing. I don't necessarily wanna do it myself, but that's a cost.
[00:01:24] Dustin Serviss: Then my account, you know, all of a sudden you introduced getting a building loan. I had a, you know, a building loan through some banks. They want your financials every year. So you gotta get the financials made. Well, that isn't just filing your taxes. That's getting financials. So that increases the cost. But if you can keep twenty thousand back and invest that or keep it, you haven't paid personal tax to take that out, which also in that tax savings starts to cover those costs. Now one caveat... And I know there's, you know, sort of recent news on student loans being forgiven and and that sort of thing. I get off...
[00:02:00] Dustin Serviss: Asked by young dentists and young lawyers. Should I pay off my student loans, and should I incorporate? So we've built models on, you know, if you have a corp and if you should pay off the loans. Usually, accountants will say, just don't incorporate yet. Keep flushing the money out because it nets the same and pay off the student loans, or else the student loans will ride, you know, forever. Because... I'm gonna talk about it in a minute. But if you can do this right, assume you didn't have a student loan, you'd have a corporation, you'd pay yourself the bare ass minimum that you need to live,
[00:02:34] Dustin Serviss: and then you'd leave back as much as you can in the corp. That way you've deferred the tax. Then you can invest in the corp in, you know, various things. And again, I'll I'll talk a little about that. Long story short, talk to your account. Your account is the one that knows the most about your situation, and that is where you should start. What's bound? You know? So this is strategy number one. Cash flow one zero one. I'll make this a little bigger. You're not gonna be able to see me. So you've got the blue corporate. Is it a corporate bank account? So you wanna pay yourself a paycheck.
[00:03:08] Dustin Serviss: You know, and, again, we're saying first of the month, pay yourself a paycheck. You're gonna sit... Pay some personal tax to the CRA. And then over the course of the month, you spend money. And near the end of the month, if this is done right and you're really tight with your... I don't mean tight. I mean, really prudent and you've really laid out your, you know, what... Where you spend your money and you know what the numbers are, at the end of the month, you should have a very small amount in your personal checking account. Sometimes what people will do is take too much out of the corp, then they don't spend it.
[00:03:41] Dustin Serviss: And if they don't spend it, then they are saving it, you know, in personal savings. Now in personal savings, you could have, you know, build up. You get your TFSA, but you have paid personal tax to get that money out of the corporation. And, again, I see some chatter on the chat. Yes. Talk to an account. Every person's scenario is different, and some accounts take the stance of you're gonna either pay the tax now or you're gonna pay it later. But we've done the models. We've done the research on if you defer it and you build up sort of a... You build up a corporate savings of what that math looks like.
[00:04:13] Dustin Serviss: So, again, everyone's scenario is different. But this concept of if you don't take what you... If you don't take more than you need out of the corp, you've got an opportunity to decide what to do, and it's not automated.