From a perspective of tax liability, any incentive to incorporate if deductible expenses are very low?

Question

Have a contract lined up for 170k over a year; projected deductible expenses shouldn't exceed 15k. I plan on incorporating at some point regardless, but I'm wondering if my tax liability might be even greater by incorporating. I don't believe in consuming for the sake of deductibility and the contract I have lined up is a "safe" one, so I don't need the legal protection gained from incorporating just yet. It looks like the tax benefits of incorporating are only realized when a business consumes to the extent where the net income is substantially lesser than the gross. Am I missing any other incentives here?

Answer 1

It is better for you to incorporate as soon as possible! Or form a partnership. With these kind of numbers it would be wise to seek the help of a tax professional, or an attorney who is an expert in tax matters. NATP - National Association of Tax Professionals has listings all over the Country (US & Canada) of Tax people at different levels who can help you. Many tax professionals are certified in Financial Planning as well, and for a good price you can get some beneficial help.

If you aren't incorporated and something goes awry, and you are sued, your personal assets can be attached....imo

good luck & blessing

Answer 2

There really is no good tax reason to incorporate a business. A regular C-corporation would give you two levels of taxation. A corporate level tax, and then a tax when the income is distributed as a dividend. You could do other forms of corporations such as an S-corp, but unless you have legal reasons for incorporating, you can operate as a sole proprietor (i.e. a Schedule C on your 1040) and not have to deal with the complexities of being a corporation. Just make sure you get a good CPA for your tax returns, do not go to one of those places at the mall.

Answer 3

I disagree with the above. No reason to rush at all if no liability worries. Will cost you & bury you in extra paperwork.