Canada Revenue Agency · Active business & the small business deduction
The business is framed as the corporation performing the regulated activity, not as providing the shareholder's services
What the rule requires
A PREC exists to provide one individual's services. The articles should frame the business as PROVIDING the controlling shareholder's services to the brokerage, not as the corporation itself performing the regulated activity.
Authority: ITA s. 125(7) ("personal services business")
What goes wrong
The articles describe the corporation as carrying on the operations of a real estate agent or broker, rather than as providing the controlling shareholder's services to a brokerage. If CRA characterises the shareholder as an incorporated employee of the brokerage, the corporation is a personal services business: no small business deduction, a higher federal rate, and deductions limited essentially to salary. The wording works against the position rather than for it.
What good looks like
The articles frame the business as providing the controlling shareholder's services, which supports the position that the corporation is not an incorporated employee.
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An automated drafting scan, not legal or tax advice. It reads how the articles are drafted; it does not advise on your circumstances, and Capital Toolkit does not file articles with the Province.
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