1. Strong, Clear and Correctly Worded Written Contract
• Written contracts have been given significant importance by Tax Court judges.
• Landmark Wiebe Door tax court case criteria should be used for basis of contract.
• You should have your own lawyer review the written contract, and you should use a lawyer experienced with the tax issues involved.
2. Work Relationship Conduct must support the Contract
• The actual working relationship experience must not contradict any of the written contract terms.
• Ensure that there are many significant working relationship differences between yourself and the employees of your client.
3. Limit Contract Length
• Limit written contract terms to a maximum of 6-12 months, and consider avoiding multi-year renewals/relationships with the same client.
4. Diversify Your Client Base
• Consider avoiding always having one client be 100% of your revenue, i.e., even some part-time clients that account for 10% to 20% of your revenue is preferable.
• It also makes good business/economic sense to always have more than one client/revenue source.
5. Implement Asset Protection Strategies
• Creative and pro-active asset protection strategies should be utilized to protect yourself from CRA and also any other similar “attacks” on your finances, i.e. lawsuits.
• Such strategies range from simply ensuring that major financial assets (i.e. personal residence, RRSP’s) are kept in only the name of the low risk spouse, to more complex asset protection strategies.
6. Control Your Work
• Although the client can specify results and deadlines, you should control the method and manner of work to achieve those results.
• E.g. If you hire a painter to paint your house, you would provide the deadline and the colour choice and they would determine the process.
7. Get Liability Insurance
• It’s important to assess your risk and consider coverage because, as an independent, you don’t have the financial resources of a big company to back you up in the event of a client lawsuit.
8. Build a Professional Profile
• Websites are not limited to small and large corporations. They prove beneficial for contractors / freelancers alike as they serve as a method of promotion for who you are and the services you offer.
• Have your own business cards and avoid having a business card with the client’s name on it and avoid appearing on the client’s internal telephone list.
That makes you look more an integrated part of the company and less like an outside consultant or contractor.
9. Your Company’s Name Should Reflect Your Services
• Ask yourself when you last did business with a company named 123456 Ontario Ltd. Name your company appropriately.
• Numbered companies are good for holding companies not for operating companies.
10. Hire Experienced Professionals to Represent You
• If you do not understand the language and implications of the personal service business (PSB) risk, it is very easy to expose yourself to risk.
We would be pleased to discuss and review your situation with you for free with a view to minimizing the impact that a CRA audit could have on your business. Call us today at 416-487-4300 or email us at email@example.com to book an appointment.