Benefits to Incorporating In Canada for traders

Discussion in 'Professional Trading' started by GRECHA, Apr 25, 2007.



    What are the benefits to incorporating trading profits in Canada instead of just declaring them as income for an individual?
    Any clarification on the dis/advantages would be awesome.
  2. ER2


    There are sometimes (but not necessarily always) cases where incorporation can help protect your assets -- talk to an accountant about this aspect of incorporation.

    If you are a profitable trader and wish to *defer* your income tax, then incorporation is the way to go. Your company will be taxed at a much lower rate and you won't pay any personal income tax until your company pays you (in the form of dividends).

    Also, the lower tax rate for incorporations means you can compound your growth more effectively because less money is shaved off each year for income tax.

  3. The only advantage is that you can deduct your losses as ORDINARY losses, instead of Captial Losses. That means, you can actually get some benefit out of taxes, while if it were treated as Capital Losses, you might never be able to get to write them off without the offsetting Capital Gains.
  4. ER2



    I'm not incorporated but I'm still able to write off trading losses, expenses, etc. directly against income because my day trading activity is declared as income (not capital gains) for CRA purposes.

    Please let me know if I'm missing something.

  5. depends if you are trading for INCOME or CAPITAL GAINS. If you are trading for INCOME a corp might be beneficial, if you are a long-term type trader and you are paying tax on capital gains then Canada has one of the lowest rates in the first world.
  6. This is 2007.
    Simple tax loopholes were all closed long ago.
    Always assume the above to start.

    Keeping the above in mind...
    An individual CANNOT pay significantly less taxes simply by incorporating.

    There is the definite benefit...
    That one can defer and smooth out income over many years.

    Unless you are a CPA...
    And are going to insist that my top accounting firm is incompetent...
    Well, you get my drift.