Income Splitting Through Paying Salary or Wages As a Canadian business owner, you can decrease your actual income by hiring your spouse or children as employees and passing along some of your business income to them in the form of salary or wages.

Can I split my income with my spouse in Canada?

Both you and your spouse or partner would have to complete and file the Canada Revenue Agency’s form T1032, Joint Election to Split Pension Income. After that, you’ll have to fill out a new form T1032 for every year you choose to income split.

What makes a partnership a partnership in Canada?

Registration for the GST/HST; A partnership is an association or relationship between two or more individuals, corporations, trusts, or partnerships that join together to carry on a trade or business. Each partner contributes money, labour, property, or skills to the partnership.

How does a limited partnership work for a small business?

Typically, limited partners aren’t involved in the day-to-day operations of the business. Their contribution is a financial one. Because of this, setting up a limited partnership can be an excellent way for a small business to raise money.

Can a married couple file taxes as a business partner?

“As far as taxes go, the CRA sees you and your business partner husband as two self-employed people conducting a business,” says O’Neil. “Your marriage comes into play elsewhere on your tax return, but for reporting income and expenses on your share of the partnership, you’re on your own.”

What happens if you own a small business with a spouse?

Corporations are, for tax purposes, a separate entity and sole proprietors are, well, sole, so the partnership is the most likely tax situation married small business owners will encounter. Your partnership in business has no effect on spousal deductions and tax credits.