Summary

As the owner of a small business, you'll save taxes any way you can (that's just smart business).

You can save income taxes by retaining some income in your corporation, and paying some of it out to yourself and your co-owners in the form of salaries. This works because initial corporate tax rates are usually lower than the owners' individual income tax rates (at least on the first $75,000 of corporate taxable income).

Even if your business isn't a corporation, you can take advantage of these tax savings by electing to be taxed as a corporation -- something you might want to think about if you need to leave some income in your business from year to year for expenses or expansion.

In plain English, Save Taxes With Corporate Income Splitting will show you how to calculate the optimal amount of business income to keep in your business in order to save income taxes.