Calgary Consultant Lawyer

CALGARY CONTRACTOR LAWYER

Being a business consultant or contractor has specific benefits, frequently from a tax-standpoint, together with serious pitfalls. Managing one's contractual relations, while optimizing one's profit potential, are of considerable importance to many contractors and consultants, especially in today's business environment, which is subject to numerous legal challenges and considerations.

In particular is the challenge of a consultant / contractor having their business activities construed by the Canada Revenue Agency (CRA) as that of an incorporated employee, based on the CRA's analysis and scrutinization of personal service corporations (personal service businesses). For when a consultant's company is classified as a personal services corporation, it receives adverse tax treatment from the CRA, among such negative effects being the disallowance of standard business expenses, including the Small Business Deduction and the denial of the "general rate reduction" normally afforded to corporations which have been disallowed to PSBs for tax years that began after October 31, 2011.

An analysis of one's position relative to that of the Canada Revenue Agency, should take appropriate consideration of the CRA's position as set forth in RC4110 Employee or Self-employed?, which establishes key indicies for making the assessment of as to a legitimate independent contractor, at least in the government's eyes [click for highlights].

One should also look to the CRA's explanation as to a consultant/contractor's company being a personal services corporation in T4012 – T2 Corporation Income Tax Guide, Chapter 4, which identifies a personal service corporation as "a business that a corporation carries on to provide services to another entity (such as a person or a partnership) that an officer or employee of that entity would usually perform." From these starting points, through further guidelines and directives of the CRA (see PSB Taxation), together with judicial decisions on the matter, the CRA has built a strong position from which to attack what they construe as personal service business. As such, appropriate legal advice and structuring is imperative to any consultant or contractor attempting to remain onside with the CRA (or at a minimum have a defensible legal position).

Providing legal advice and strategic direction to Alberta-based contractors and consultants is a key aspect of business lawyer Christopher Neufeld's corporate law practice. As such, if you are a contractor or consultant in Alberta, and are looking for advice and/or structural planning for your business operations, contact lawyer Christopher Neufeld at Chris@NeufeldLegal.com or 403-400-4092.