Tax tip for small business owners: Get incorporated

You can get an exemption that could save you thousands

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From the April 2016 issue of the magazine.

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tax tipEvery small business owner has an opinion about whether to remain a sole proprietor or to incorporate, but here’s a situation in which you might want to do the latter: You’re selling your company. Why does it matter? Because someone selling an incorporated business can keep $813,000 of the sale proceeds under the lifetime capital gains exemption. Anything above that amount is subject to capital gains tax, but anything below that is yours, says Dorothy Keating, a St. John’s–based accountant with Noseworthy Chapman. Otherwise, a sole proprietor selling assets, such as client lists, will have the entire proceeds taxed.

The bottom line: Making use of the lifetime capital gains exemption can save you hundreds of thousands of dollars.

See more tax tips here.

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