Is building a corporation a good option?
Creating a corporation is not necessarily less taxes. In fact, you'll face the problem of double taxation, and since you must pay yourself a reasonable salary, if your corporation doesn't earn much to give you as dividend after the salary, and/or your tax bracket is low, you'll in fact may end up paying more taxes. Also there's a lot of bureaucracy involved in managing a corporation. Liability on the other hand is important, and what's more important - is asset separation and limiting the liability to the corporation assets, keeping your personal assets safe. To achieve that, you don't have to create a corporation, but you can create a Limited Liability Company (LLC). LLC are disregarded entities for tax purposes (i.e.: you won't have to pay taxes twice, only once as a sole proprietor/partner), but provide the liability limitation and asset separation. LLC's are much less formal, and require much less paperwork reducing the risk of corporate veil piercing because of non-compliance. I myself decided to manage my investments through LLC's for that very reason (asset separation). Compared with a Sole Proprietorship, the main disadvantages of an S-Corporation or an LLC are that it adds a lot of management overhead (time, and possibly money if you don't do it all yourself), and there are fees you must pay to incorporate, as well as additional yearly maintenance fees which vary by state. You should be able to weigh the tax savings and liability protection against the extra costs and hassle, and see which way the scales tip. As a rule of thumb, the bigger your business gets or the more income you make, the more attractive incorporating becomes. Note there are some additional taxes that certain jurisdictions impose on business income. For example, IL and CA charge 1.5% tax, NY is less, but NYC is 8.85%! In NYC specifically, you could actually end up paying slightly more tax as an S-Corp than you would as a Sole Proprietorship. In most places though, the nominal local taxes will still be less than the FICA taxes you could potentially save.
And more than that it would encourage people to invest in companies for the long term, allowing Executives and CEO's and such the breathing space to make a tough decision that's bad in the short term but good in the long term...  Rather than hiring a psychopath CEO that's only trying to boost short term stock value for his own bonus/salary IANAL (and nor am I an accountant), so I can't give a definitive answer as to legality, but AFAIK, what you propose is legal.  But what's the benefit?  Avoiding corporation tax? It's simplistic – and costly – to think in terms like that. You need to run the numbers for different scenarios, and make a plan.  You can end up ahead of the game precisely by choosing to pay some corporate tax each year. Really! Read on. One of the many reasons that self-employed Canadians sometimes opt for a corporate structure over being a sole proprietor is to be able to not pay themselves everything the company earns each year. This is especially important when a business has some really good years, and others, meh.  Using the corporation to retain earnings can be more tax effective. Example: Imagine your corporation earns, net of accounting & other non-tax costs except for your draws, $120,000/year for 5 years, and $0 in year 6.  Assume the business is your only source of income for those 6 years.  Would you rather: Pay yourself the entire $120,000/yr in years 1-5, then $0 in year 6 (living off personal savings you hopefully accumulated earlier), subjecting the $120,000/yr to personal income tax only, leaving nothing in the corporation to be taxed? Very roughly speaking, assuming tax rates & brackets are level from year to year, and using this calculator (which simplifies certain things), then in Ontario, then you'd net ~$84,878/yr for years 1-5, and $0 in year 6. Overall, you realized $424,390. Drawing the income in this manner, the average tax rate on the $600,000 was 29.26%. vs. Pay yourself only $100,000/yr in years 1-5, leaving $20,000/yr subject to corporation tax. Assuming a 15.5% combined federal/provincial corporate tax rate (includes the small business deduction), then the corp. is left with $16,900/yr to add to retained earnings in years 1-5. In year 6, the corp. has $84,500 in retained earnings to be distributed to you, the sole owner, as a dividend (of the non-eligible kind.) Again, very roughly speaking, you'd personally net $73,560/yr in years 1-5, and then on the $84,500 dividend in year 6, you'd net $73,658.  Overall, you realized $441,458.  Drawing the income in this manner, the average tax rate on the $600K was 26.42%. i.e. Scenario 2, which spreads the income out over the six years, saved 2.84% in tax, or $14,400. Smoothing out your income is also a prudent thing to do. Would you rather find yourself in year 6, having no clients and no revenue, with nothing left to draw on? Or would you rather the company had saved money from the good years to pay you in the lean one? How about having him make you CEO (and/or president, depending on structure), and keep him as an advisor. Then over the next year you can evaluate if you want to be the owner and/or if costs justify it. You can use your first year as training. If you happen to be looking around one of the most secured business investment Opportunity, Franchise Business investment Opportunity is one of the best options to look at. A franchise is a single platform where you can explore your area of interest and nurture it safely. Moreover, it gives you the opportunity to step ahead with the world's leading companies, and earn a market reputation easily. We offer a variety of business enterprise formation applications designed to make putting in a private organization as simple and straightforward as feasible. They range from the simple Digital Package - providing the minimum prison requirements for reputable Company formation - to the All Inclusive, which includes a variety of beneficial extras, including a prestigious registered office, a commercial enterprise provider. This corporation shape is usually utilized by non-earnings Company inside the United States. It protects the private finances of the business enterprise owners in a comparable manner as a corporation limited via stocks. Instead of getting shareholders and stocks. Crony capitalism isn't capitalism.  It is basically a case where the government turns a blind eye to wealthy individuals breaking the law, or is even complicit in giving away taxpayer money in the form of no-bid contracts.  This is much more prevalent in China's state-sponsored capitalism.  Their system is textbook crony capitalism.  We still have it but to a lesser degree.  Don't blame capitalism for the government's failure.  Crony capitalism absolutely requires a complicit strong central government in order to flourish.    And there is a difference between the  suburbs around Las Vegas and Chinese ghost cities.  The Las Vegas suburbs were at least built with buyers in mind, even though this turned out to be a mistake.  It was a mistake on the part of a few individuals.  Absolutely a mis-allocation of capital, and I didn't mean to imply that capitalism is perfectly efficient in allocating capital.  But the Chinese ghost cities are a centrally planned project made for the intention of moving rural Chinese people into them in future 5-year plans.  Whether that turns out to be a good investment has yet to be seen, but it seems like it will involve moving lots of people against their will.  But does it not make more sense to gradually build up a city according to what is currently needed, as capitalism tries to do, rather than spend lots of money building an entire city, much of which may never be needed?  There are so many imbalances brewing under the surface in China, it seems like only a matter of time before they all come to a head. You are absolutely correct, incorporation and the fiduciary responsibility that comes with it almost always leads to a sacrifice in product quality and long-term business principles. I always think of the difference between McDonalds and In-n-Out hamburgers as examples of where each road leads. 2 very viable options.  Real Estate is cheap now and if you hold a few properties for the long term the price should rise.  You can use them as rental properties to supplement your income.  In addition agriculture is also very viable.  How else you gunna feed 7 billion?  Might as well cash in on that. On a company level ROCE over WACC would be more meaningful in my view but the end result should be be pretty much the same. This concept is closely related to value creation. Value can only be created when a company's ROCE is exceeding its cost of funding - WACC. This is also tightly related with the NPV concept. Value is only created when the NPV on a project is &gt;0.  And to directly answer OP. Study in detail WACC. (weighted average cost of capital). Focus on the Modigliani–Miller theorem with taxes and financial distress costs. Good luck. "You'd be mistaken to this there is any morality involved in (most) corporations - neither positive nor negative; running a business is amoral. Some business missions have a moral intent - such as pharmaceuticals, health organization, etc. - but all have an amoral underbelly.  It's fairly simplistic - the purpose of a business is to produce a profit. At some point, all successful, well functioning businesses will work down their list of ways to produce a profit - after they've established market share, a lasting brand, customer loyalty, finances well in the black - and eventually look towards capital preservation. In most bodies with a large monetary wealth, capital preservation becomes a key focus (in other words, once you master the art of making money, you then need to master the art of keeping it).  Thus the ability to then focus on these things. To continue to just pay taxes is like running an efficient, but leaky ship. The more you preserve, the longer you'll be around and the more power you'll yield to stick around.   This last point is also important to keep in mind - unlike you or I - a company will basically last forever (well at least until society collapses). You or I are only here until we die - and whatever wealth we have we may try to preserve for our kids or next of kin. A corporation is always here, the people in the corporation &amp; it's owners change hands, but the corporation survives. Frankly any business that isn't aiming to make a profit, is either going to fail quickly or is by definition a ""non-profit"".  Here is where I would believe the government plays a balancing role - to reign in the power of corporations (lest they rival their own). But, any good corporation will handle that problem as well (Regulatory capture, anyone?).  Also, consider that for the most wealthy among us, it's probably not about the money anymore. It's now probably about the game. This is certainly where the psychopaths get that manic edge on the rest of us." In addition to asking an accountant, I would also ask a lawyer.  When exploring the same question for myself, I found that one of the benefits of incorporating or forming an LLC is that your personal assets are better protected.   Including asset protection, here are 5 reasons to incorporate: Initially, I thought that as I had so few assets, I should not be concerned.  I was glad I was able to do a free consult with a lawyer who advised me to look into forming an LLC.  (Ultimately, my planned business idea never panned out.  So, I never went the incorporation/LLC route.)  Hope this helps! I would listen to chrissundberg below.  Most professionals I meet and interact with in accounting firms, law firms, lending, and others are by the book, smart, professional, and honest in their business dealings.  Of course I have also run into a small minority that try to avoid contractual obligations or pull a fast one on the auditors, but these guys are known quickly throughout the business community and avoided.    You need to reevaluate your thoughts on government's role in business and the finance industry, which you are clearly interested in joining.  Quite frankly you won't last a week coming in most companies if you vocalize the government should do audits and business is amoral. My understanding is you can create a company 0 value. Then you need to either loan the company the money to buy the building (it will still have 0 value as it will have a debt equal to it's assets) or sell share to investors at any price you like to raise the money to buy the building.  Once shares have value (as valued by a chartered accountant - not anyone can do this) then anyone recieving shares will have to pay income tax. This is why keeping the shares as no value for as long as possible can be preferable. Also a benefit of using share options. talk to your investors, see what they require. * Yes, you should incorporate if you plan on seriously investing in real estate. This not only limits liability in terms of paying back the debt but also in case your tenants sue you.  * Pass-through entities. Typically an LLC but it depends on the state if they have good or bad LLC laws. Pennsylvania is a state where you would not want to incorporate as an LLC. Other options include S-corps and LPs.  * Loans are taken out by corporations against the property. Typically mortgage loans are non-recourse. If you set up a company for each property, this further insulates you against the bank capturing other properties within the pool. However, recourse carveouts can still end up getting you on the hook personally for the loans. These typically include voluntary bankruptcy. You would very rarely have to file for bankruptcy anyway for your real estate investments. At worst, it will end in foreclosure but banks typically would prefer deed-in-lieu just because it is faster and easier for them too. You just turn over the keys and walk away. It will have very little impact on your personal finances or record. Everyone in real estate walks away from properties and leaves them with the bank. It's a fact of doing business and your lender should have been comfortable owning your property at the basis they lent money to you. If they weren't, they were just stupid.  * Yes, every real estate investment requires equity in the property. Typically it's a 20% equity check but if the lender underwrites the property to a lower value than what you purchased it for, you may have to line up more expensive financing. Whether it's wise or not depends on what you think and what you should consider are the risks both ways. What are the risks? For Let's say that the company produces great value and its current price and initial price are well below what it's worth.  By investing some of your money in the company, you can take advantage of this value and capitalize off of it if the market recognizes this value too, or when the market does (if it's a successful company it will be a matter of when). Other reasons to be for it are that the tech industry is considered a solid industry and a lot of money is flowing into it.  Therefore, if this assumption is correct, you may assume that your job is safe even if your investment doesn't pay off (meaning, you don't lose income, but your investment may not be a great move). Against Let's say that you dump a lot of money into your company and invest in the stock.  You're being paid by the company, you're taking some of that money and investing it in the company, meaning that, depending on how much you make outside the company, you are increasing your risk of loss if something negative happens to the company (ie: it fails). Other reasons to be against it are just the opposite as above: due to the NSA, some analysts (like Mish, ZeroHedge, and others) think that the world will cut back on doing IT business with the United States, thus the tech industry will take a major hit over the next decade.  In addition to that, Jesse Colombo (@TheBubbleBubble) on Twitter is predicting that there's another tech bubble and it will make a mess when it pops (to be fair to Colombo, he was one of analysts who predicted the housing bubble and his predictions on trading are often right). Finally, there is a risk of lost money and there is also a risk of lost opportunity.  Looking at your past investments, which generally hurt more?  That might give you a clue what to do.