changing from sole proprietor to incorporate in BC, Canada...

[R Green]

Hello

I was wondering what the pitfalls are with respect from operating a business
under sole proprietorship for 3 years and incorporating it suddenly for tax
purposes as the business is going into 250k/annum sales...

I understand that there is a deemed sale of the sole proprietorship when you
change from sole proprietor to an incorporated business. How does one
determine the fair market value of this business? This deemed sale would
trigger a non cash capital gain of huge proportions as the business was
started out of nothing.

How does one avoid this tax legally? I was thinking that one can wind down
the sole proprietorship biz and open up a new biz under a different name?

 

[Wolfgang Rochow]

Hello

I was wondering what the pitfalls are with respect from operating a business
under sole proprietorship for 3 years and incorporating it suddenly for tax
purposes as the business is going into 250k/annum sales...

I understand that there is a deemed sale of the sole proprietorship when you
change from sole proprietor to an incorporated business. How does one
determine the fair market value of this business? This deemed sale would
trigger a non cash capital gain of huge proportions as the business was
started out of nothing.

How does one avoid this tax legally? I was thinking that one can wind down
the sole proprietorship biz and open up a new biz under a different name?

Go see a good accountant. We went through a massive reorganization with
considerable tax implications. We received excellent advice from Jas
Butalia, CA, (he is one of the better ones)
(e-mail address removed) (remove contact)
his cell phone is 403-874-6833
If he can't help you himself, he'll put you in touch with a qualified
counterrpart in your area.

Wolfgang Rochow
(e-mail address removed) (remove contact)
www.gestalt.com