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Contractors / Consultants

Personal Service Business




Being an Alberta-based consultant or contractor who effectively structures his/her business operations can realize specific financial benefits, frequently from a tax-standpoint, although there is also the potential of subjecting oneself to serious pitfalls and adverse tax ramifications (in particular due to legislative changes related to conducting one's operations through a company that is deemed to be conducting a personal service business). Managing one's contractual relations, while optimizing one's profit potential, are of significant importance to most consultants and contractors, especially in today's business environment, which is subject to numerous legal challenges and considerations.

In particular is the challenge of a contractor or consultant having their business activities construed by the Canada Revenue Agency as that of an incorporated employee, based on the Canada Revenue Agency'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 Canada Revenue Agency, among such negative effects being the disallowance of standard business expenses, including the Small Business Deduction.

The initial starting point from which the Canada Revenue Agency looks to make its determination as to a consultant/contractor's company being a personal services corporation is T4012 T2 Corporation Income Tax Guide, Chapter 4, Canada Revenue Agency, which states that 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 that starting point, through further guidelines and directives of the Canada Revenue Agency, together with judicial decisions on the matter, the Canada Revenue Agency 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 Canada Revenue Agency (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 our law firm'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 Neufeld Legal P.C. at or 403-400-4092.

Making a commitment to providing effective legal services to corporate leadership through the various phases of a company's existence, from its inception through its operational management and engagement in key strategic moves to the purchase and sale of the company (mergers, acquisitions and divestitures). What we strive to provide is the legal insight and direction that comes from years of working with a multitude of corporations, sole propreitorships and partnerships in advancing their business objectives. Our mailing address is Neufeld Legal P.C., 144 - 4th Avenue SW, Suite 1600, Calgary, Alberta T2P 3N4. Legal Disclaimer. Privacy Policy. © 2013.