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he word corporation usually
‘to the image of a massive
structure, like IBM, Alcan or
General Motors. However, corporations
come in all sizes—from the large public
corporations consisting of fifty or more
shareholders to small private companies.
In some provinces it is possible for one
person to form a company and appoint
himself as its only director. Asa matter
of fact most people engaged in provid-
ing services (e.g. musicians, engineers,
coaches, actors, radio announcers,
pharmacists) may cause the incorpora-
tion of a company of which they or
members of their families are the con-
trolling shareholders. In most cases
these people arrange for all the income
that they previously received, to be
earned by companies that they create
and own, and they become salaried
employees of the companies. In other
cases they just pay a fee to the corpora-
tion for the services it administers to
aspects of their business.

  

FERRIIARY 1974

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By Mark Ricketts, Financial Editor

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This practice of interposing a cor-
poration between an individual and a
source of income can result in tax sav-
ings. As a result there have been a num-
ber of court cases fought between the
Minister of National Revenue and tax-
payers, the principal issue being,
whether the income of the company
incorporated to carry on the business
normally conducted by the individual, is
the income of the company or the
individual. The result of these cases
seem to suggest that the ordering of
one’s affairs to minimise tax is quite
legitimate. As Mr. Justice Donovan said,
“The heavy incidence of surtax on large
incomes has for some time led artistes
and others in the world of entertain-
ment to adopt the device of forming a
limited compary which they control,
and giving the company, by means of a
service agreement, the right to their
services. In return the company pays the
artistes some modest salary. The com-

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VANCOUVER CALENDAR MAGAZINE 47