Ben operates a successful accounting practice in a province with the following tax rates:

Top marginal personal tax rate on most income (federal and provincial) 47%

Top marginal personal tax rate on eligible dividends (federal and provincial) 30%

Top marginal personal tax rate on non-eligible dividends (federal and provincial) 33%

Provincial corporate tax rate on income eligible for the small business deduction (SBD) 6%

Provincial corporate tax rate on all other income 10%

Ben has an annual income of approximately $400,000 before tax from his business. This is active business income that is eligible for the small business deduction. He requires $175,000 pre-tax income to meet cash-flow needs for himself and his family. Ben has other income that puts him in the top tax bracket.

a) Describe the tax advantages to Ben of incorporating his business.

b) If Ben says that he needs all of the cash from his business to fund his living expenses, explain how that would affect the tax advantages discussed in a).

c) Explain the options available for funding the $175,000 annual pre-tax cash requirement if Ben proceeds to incorporate his business and briefly discuss the advantages of each option from a tax perspective.