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Pros and Cons of a PREC

October 04, 2020
Pros and Cons of PREC

PRO: Once you incorporate, your brokerage will pay your commissions to your corporation and not to you personally as a Sole Proprietor. Your business profits are taxed at a corporate rate of 12.2% rather than a higher personal tax rate.

PRO: A PREC will allow you to defer your tax obligation to a later date. If you earn more money in a year than you need to cover your living expenses, you can choose to withdraw your earnings at a future date.

PRO: You may be able to split your income with a member of your household who is in a lower tax bracket. The result is that you can withdraw more money from your PREC while paying less tax than if you withdrew it all yourself.

CON: There are higher costs associated with owning an incorporated business. Initially, there is the cost to set up the incorporation, as well as the requirement to file a corporate tax return annually (T2) in addition to your personal return (T1)

Recommendation:
Speak with a qualified financial professional to assess what’s right for you based on your business and personal situation. Contact AZ Accounting Firm at 877-252-2003 for more information

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