Incorporation is a legal process that creates a distinct legal entity separate from its owners (shareholders).
Incorporation is generally undertaken because small business owners want to limit their personal liability and/or for tax advantages. It is always wise to speak with an accountant when deciding whether to incorporate a business. There is a federal incorporation process, as well as a provincial. Our firm can advise you about the process of incorporation, the implications from a financial standpoint, as well as discuss the pros and cons.
Make an informed decision with our help.
Should You Incorporate Your Business?
Incorporating your small business offers a broad range of advantages, including:
- Limited Liability
Incorporating offers you limited liability, meaning that in the event of a lawsuit or bankruptcy, you won’t be held personally responsible for the debts of the corporation, provided you comply with government rules. - Flexible Financing Options
To raise capital for your business, incorporated businesses can issue shares to friends, family, business associates and other investors. - Tax Benefits
Corporations can benefit from lower rates of income tax and can carry forward losses from previous years to offset profits from the present year. - Continuous Existence
Because a corporation is a separate legal entity from its founder, its existence is not limited by your lifespan. This means the corporation can exist in perpetuity and be transferred to future generations. - Capital Gains Exemption
When you sell your shares from a Canadian-controlled private corporation, you can claim a one-time capital-gains tax exemption of $800,000 (certain rules apply)