fasea

Hi There,

I've just landed in Vancouver and have an opportunity to do some freelance work for a UK based company who I have history with.

Normally for contracting work in the UK (I believe I havent done it before) I would setup my own limited company and then have a contract between companies, and would send a monthly invoice and then do my own taxes etc or get an accountant.

As I want to submit my P85 (as soon as I get my P45 back etc) I assume its going to make it a lot easier if I do the equivalent but in Canada and get the UK company to contract with my Canadian company.

Does anyone have any knowledge on how to set this up in Canada, or can point me towards some useful links?

Any advice much appreciated. I'll do some searching on google but wanted to see if anyone here has already gone through this before.

Cheers

Andy

Aviator

http://www.bcbusinessregistry.ca/

Be careful and get advice before incorporating a business. Talk to an accountant and lawyer. There are legal responsibilities and it can be way more expensive to get out of than into.

You need to figure out why you want to incorporate first. To run a business you certainly don't need to. Probably the majority of businesses in BC are not incorporated.

You would not need to register a company in the UK either. Incorporation is usually done for liability limitation or tax benefits. You need to get advice before doing this.

DIY incorporation can be inexpensive to do, $500 - $1000 or so. I was involved in a business when it Incorporated and we spent $5000 on professional fees to be sure we got the share structure etc, right. To be self employed you don't need to register anything to start operating. Read the above link for more info.

JonboyE

The Aviator makes a good point. Do you really need to incorporate?

Reasons to incorporate:

a) No personal liability. Is this even an issue in IT contracting? A bank will want a personal guarantee before lending money and the government will hold you personally liable for HST and withholding taxes. Anyway, a good insurance policy will protect you from most personal liability.

b) Tax deferral. Only really an issue if you are earning much more than you need to live on. You can avoid CPP by paying yourself in dividends but this is not necessarily a good idea.

c) To protect a trading name.

d) The big one, IMO, is that it makes you more attractive to an "employer." If a company hires someone as a contractor, and the CRA later decide it was an employer/employee relationship then they charge the employing company all the tax, CPP and EI that would have been withheld from an employee, plus penalties and interest.

Whilst not foolproof, the corporation puts a degree of separation between you and the "employer". Given the choice between two equally talented people, one operating through a corporation and one not, the incorporated contractor will win every time. Some companies will only hire incorporated subcontractors.

The disadvantage of incorporating is the time and money required to administer it.

The kind of corporation you need can have a simple share structure *. An unlimited number of common shares without par value is probably all you need. You can adopt the model articles in the Business Corporations Act. You can do it yourself for less than $400.00. Add $30.00 if you need a name as well as a number. All you need is here http://www.bcregistryservices.gov.bc...x.page?#incorp

On an on-going basis you will need to file an annual report with the government to let them know the corporation is still active. Cost $45.00. You will also need to file a corporate tax return. An accountant will charge you $1,000 and up (many will have a minimum charge of $1,500 or more) to do this. If you operate as a sole trader your accounting fees will be more in the range of $300 - $400 for a similar level of business activity.

In either case, if your sales revenue will be more than $30,000 you must register for GST/HST. Work done for the UK client will be taxable, but the rate is 0%. You can reclaim the GST/HST in your business expenses.

* I'm guessing because I don't know you or your situation or objectives.

fasea

Great thanks for the info.

The main reason for incorporating is that I believe the company that wants to hire me has a general rule of only employing LTD companies. Not sure why but its probably to make sure they have a degree of separation as you said - for tax purposes.

One other thing I was thinking, could I setup a UK LTD company (which seems easier than setting up a Canadian incorporated company) and me simply me a employee working in Canada?

Will look into the incorporation thing if they insist on it I dont see $400 as a big deal to start the company, also I doubt the companies annual return would be that complicated so maybe I could look to do that myself.

Cheers

Andy

JonboyE

IMO it is easier to setup a BC corporation, though neither are very difficult.

However, if you are living in BC it is much simpler to use a BC corporation. If you operate a UK corporation from Canada it is quite likely that the CRA will deem the corporation to be tax-resident in Canada and you will end up with some complex, and very expensive, international tax issues to resolve.

On a more practical side, a UK corporation will have to collect and remit VAT from a UK customer. However, it cannot claim an input tax credit for the HST it pays in BC. Therefore your business costs will be higher.

The bureaucracy is surprisingly business friendly here.

carrie82

Hi

I am in a very similar situation and would really appreciate you telling me what you found out/ decided to do? i am currently living in Vancouver and already have a UK ltd company set up which is continuing to invoice my UK clients. I know i have to sort out a new structure- i just don't know what i have to do.... or who to speak to. Any help you could offer on what advice you received/ or who you used for advice/ accounting/ company law would be great!

Many thanks

Carrie

NikkiB

I have set up my own business in BC and I am an accountant.

Message me if you want to discuss.