Drafting Business Contracts Importance

To avoid being considered employees, many consultants choose to incorporate themselves. They, therefore, offer their services through a joint-stock company and acquire the status of “small business,” benefiting from more favorable tax rates. And as you can imagine, the benefits are much less attractive.

Subordination Link:
Determining Your Business Contract

At the heart of this discord? The service relationship between you and your client. If your client’s employees can perform your services, your contract is like an employment contract, and you lack autonomy in carrying out your mandates. You may be subject to ESP status because you have an employee-employer relationship with your client. Subtle, but enough to keep you from being eligible for the reduced tax rate and deducting your business expenses.

In these kinds of situations, my profession as a lawyer in business law takes on its whole meaning. Since RQ and the CRA consider the relationship of subordination as determining, clearly establishing the working relationship between you and your client is essential. Therefore, the outcome of this change will play out in the drafting of your business contract.

A composed agreement is typically created during a touchy undertaking between parties going into a business understanding. The fundamental motivation behind this formal written understanding is to allow each concerned gathering to peruse and have a clearer comprehension of the terms or conditions, including the individual desires for each gathering and what they have settled after a careful conversation. The composed agreement will likewise suggest to each gathering that this business exchange should be paid attention to.

In any business, managing a composed agreement can give security and significant serenity to the entirety of the gatherings engaged with the exchange. For instance, a composing business contract presents the terms between the business and a representative concerning their obligations, duties, installment, and relationship. A company is lawfully dependable in consenting carefully with the representative’s wages and different advantages ordered by the law. However, the worker is relied upon to perform industriously their allocated obligations referenced as part of the set of working responsibilities.

A composed agreement gives plentiful assurance on the gatherings included when the concurred terms or conditions are not followed or are penetrated.

Why Protect Your Consultant Status?

Guaranteeing your status also means ensuring your tax advantages. The most severe thing is not to not benefit from it; it is to have to repay what was paid to you! See it as continuous work in which we support you.

You could be reclassified if your business criteria do not meet the tax requirements. The risk exists, and it does not only happen to others!

In general, the consequences of conversion to ESP are twofold: you are subject to a high corporate tax rate while being subject to a limitation on the deductibility of its expenses.

Keep Your Finance and Fiscal Independence!

As I told you, everything will play out when drafting your service contract. The main criteria that determine the employee-employer relationship are:

• The number of clients
• The work
• The source of the work material
• The potential financial risks for you
• Risks during the transmission of deliverables
• The possibility of hiring subcontractors.