Income Tax Act (tax considerations) · 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 check looks for
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. Wording alone does not decide whether the corporation is a personal services business; that is a question of fact.
Authority: ITA s. 125(7) ("personal services business")
The Income Tax Act sets no requirements for the articles; this is a tax consideration that can follow from how they are drafted.
What goes wrong
The articles do not frame the business as providing the controlling shareholder's services.
What good looks like
The articles frame the business as providing the controlling shareholder's services. The wording does not decide whether the corporation is a personal services business: that is a question of fact about how you actually work with your brokerage. It simply does not describe the corporation as doing the regulated activity itself.
Check your own articles, free
The PREC Articles Health Check reads your articles of incorporation in your own browser and rates them Red, Yellow or Green against this criterion and 29 others. The check does not upload your document to us.
It reads how the articles are drafted; it does not advise on your circumstances, and Capital Toolkit does not file articles with the Province.
Capital Toolkit is an automated service. It provides general information, not legal, tax or accounting advice, and it does not replace your own lawyer or accountant. Have a qualified professional review any document before you rely on it, sign it or file it.