Can I reduce my tax liability?
Yes though not the only reason for restructuring, a reduction of tax can be achieved by a number of ways by restructuring. While certainly not exhaustive the two most common ways is by a) transferring your proprietorship to a company and b) restructuring your company to allow for new family shareholders and some income splitting. In the first case, where there is surplus income at the end of the year (money you are able to save) you can shelter this income at approximately 12% tax as opposed to your personal rate which could be as high as 53.35% (Ontario). This applies for net income up to $500,000. Your shares will then qualify for the capital gain exemption of approximately $883,000 (2020) when sold. In the second case by freezing your company you can include other family members in your company who may, depending on their age, the type of shares they own and the amount of work they contribute, may be able to receive dividends (a return of profit to shareholders) at a lower tax rate than yourself. A person living in Ontario without no other source of income may receive over $35,000 without paying any tax.