Monday, December 23rd, 2019
I was a full-time freelancer for many years and running my business as a sole proprietor before I finally decided to incorporate. I'd thought of it before but always assumed I didn't earn enough money to make it worth my while—all that extra paperwork, bookkeeping and set-up expenses seemed like too much of a bother.
A sole proprietorship just seemed easier: I did my work, invoiced, kept track of my expenses in a spreadsheet and then filed my taxes online.
For some reason, I also thought because I was “just" a freelancer that incorporating wasn't right for me. I had this image in my mind that only “real" businesses that sold tangible items had to incorporate.
I was so wrong! Here's why:
My journey to full-time freelance writer was anything but seamless. I jumped from contracts to freelancing to even bartending on the side.
It's a pretty common journey for writers, but it was hard to take myself seriously as a business. Changing from “Danielle Kubes" to “Danielle Kubes Inc." had the psychological effect of making me feel better at setting boundaries.
And although there was extra paperwork, it held me more accountable. Drawing up the required monthly financial reports and printing profit-loss statements that summarized my revenues, costs and expenses helped reinforce the mindset that I am a business and here to make money—not just tinker around with a typewriter.
This year my financial picture changed a bit and I decided to seek out the professional advice of an accountant. I was making a bit more money and wanted to make sure that I wasn't missing out on any tax breaks.
It turned out I was!
According to David Posner, CPA, and partner at the Toronto accounting firm Zeifmans, the Canada Revenue Agency taxes us not only based on how much money we make, but also on where and how we earn that money.
Be sure to talk to a certified tax expert, like I did, to understand the tax consequences that come with incorporating.
In my case, even though I have to pay my accountant around $1,600 to file the corporate taxes, I still came out ahead. Of course, every situation is different. Be sure to contact a certified tax professional for more information.
I began the process of incorporating provincially. I did a mandatory name search online, then got a lawyer to fill out the documents for me.
I then simply printed them out, brought them in person to Service Ontario and paid a small fee. The federal government has information on incorporating here.
Although there are additional fees and compliance required for incorporating, I found it worth it for the feeling of legitimacy it offered me.
Otherwise, it doesn't really change my day-to-day. I still wake up in the morning and start writing, just like I did when I was a sole proprietor.
So far it's been worth it, psychologically and financially, and I'm excited to see if it will continue to motivate me to grow my business.