The Impact Of Tax Laws On Business Incorporation In Surrey

Reduced Corporate Tax

Most sole proprietors and business partners in Surrey decide to incorporate their businesses for tax benefits. It gives them Small Business Deduction benefits, reducing their tax liability.

When you incorporate your business, you can leave your income in your company and defer personal taxes. This helps you free up more capital that can be used for reinvestment and business growth.

Splitting Your Income

Although limited now, there is still some scope for splitting your income among your family members. Earlier, the tax laws allowed you to divide your income among all family members falling in lower tax brackets.

Now, such income splitting will be scrutinized unless your family members are directly engaged in your business activities. Your business incorporation lawyer will also help you understand specific criteria that allow splitting your business income among your family members.

Before you incorporate your business, consult your lawyer and business partners (if any) about remuneration strategies. Moreover, you can avoid punitive taxes by giving employment income to your family members instead of dividends.

Retained Earnings Through Deferrals

Tax deferrals are some of the biggest business incorporation benefits. When you leave your profits in your business, your income is taxed at a lower corporate rate. Ultimately, you save more money while allowing your business to grow.

Retained earnings give you a win-win situation. Along with increasing your personal savings, they help you reinvest in hiring, business expansion, equipment, and much more.

Along with entrepreneurs, high-income working professionals can also benefit from such tax deferrals in Surrey. This is why more and more doctors, engineers, financial consultants, etc., have started incorporating their ventures to retain their earnings.

Dividend Tax Credits

As you incorporate your business, you should know that Canada’s tax system aims for integration. It ensures that your income is taxed at almost the same rate, whether you earn it directly or through an incorporated business.

Your shareholders may claim a dividend tax credit when your business pays them dividends. This reduces their personal liabilities. Keeping this in mind, you should plan how you will pay yourself after incorporating your venture.

Consult your business incorporation lawyer to decide between salary and dividends depending on cash flow requirements, tax implications, and income level.

Capital Gains Exemption

As of 2025, individuals in Surrey can claim up to $1,016,836 worth of tax-free capital gains (indexed annually) by selling qualified small business corporation shares.

Lifetime Capital Gains Exemption is a major benefit of incorporating a business anywhere in British Columbia (BC). You can qualify for this benefit by holding shares in a Canadian-controlled private corporation (CCPC). Moreover, ensure that more than 90% of your business assets must be actively used at the time of sale.

If you are an entrepreneur planning to exit your venture or sell it, systematic corporate structuring will help you with tax savings.

Considerations For GST

You will need to register for and collect Goods and Services Tax (GST) if your incorporated business earns over $30,000 quarterly. Know that GST compliance is compulsory in Canada and requires the maintenance of clean financial records.

Once you incorporate your business in Surrey, focus on issuing proper invoices and filing GST returns. Such actions are often more manageable through an incorporated business and a well-organized accounting system.

Payroll Responsibilities

You will need to focus on your employees’ remittance (including the owners) and payroll after incorporating your business in Surrey. 

Consider deductions like Employment Insurance premiums, Canada Pension Plan, and income tax withholdings while calculating and disbursing salaries. While this additional responsibility increases administrative procedures, it lets you contribute to government benefits, which ultimately help your business thrive.