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Incorporation FAQ's
Why should I consider incorporation?
Incorporation is an excellent way to limit your liability. When
you incorporate, your personal and business assets are segregated.
If, however, you carry on a business in your own name, under a registered
name style or even as a partnership, all of your assets are at risk.
You are fully liable for the total debts and liabilities of the
business, even if you are only one of many partners. If sued, all
your assets (personal and business) can be seized to satisfy a debt.
Only incorporation can protect your personal assets.
Are there any tax benefits to incorporation?
Yes. While a proprietorship's income or a partnership's income is
taxed in the hands of the owner, a corporation's income is taxed
separately from its owners. A qualified Canadian Controlled Private
Corporation is taxed at a reduced rate. Further, tax is deferred
until dividends are paid and this deferral could be significant.
In addition, a capital gains exemption (on the first $500,000 of
capital gains) may be available upon the sale of a small business.
What other financial benefits might there be?
Since a corporation is a separate entity from its owners, it can
contract and borrow on its own account. It can raise capital by
pledging its distinct assets or through the issuance of shares.
What would happen if one of the owners of the corporation
passes away?
A corporation survives its owners. The shares can be transferred
to purchasers as an ongoing business, or be distributed by gift
or Will to the beneficiaries and heirs of the owners. Shares and
options may be given to employees.
How could incorporating improve my image?
The designations “Inc.,” “Limited”
and “Corp.” identify a company that is incorporated.
It is a powerful statement to customers, suppliers and employees
that the company is an entity larger than its owners.
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Incorporation FAQ's
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