Corporation in Canada
Did you decide to start your own business and need a Canadian corporation? Are you looking for a job, but your employer requested you to incorporate your own corporation? Are you working as a professional and need to incorporate a professional corporation? Do you have an already established business but need another corporation for a different type of business activity to claim additional small business tax deductions? Do you need a holding company to protect your patents?
Our company is able to assist clients with incorporation in all these cases. We provide incorporation services in the following jurisdictions: Federally and provincially in British Columbia, New Brunswick, and Ontario.
Why would people like to pay more money to incorporate a corporation, pay accountants for preparation and filing corporate tax returns? Why not register a simple sole proprietorship and start doing business for less?
Incorporating a corporation limits the owners personal liability. This is the major and most important advantage, which comes with incorporation of your business. It means you would not be personally at risk if the corporation takes a loan and fails to pay it back to your bank. It gives you freedom to take risks and have great rewards.
Benefits of Incorporation
A corporation has the same rights and obligations under Canadian law as a natural person. A corporation can acquire assets, go into debt, enter into contracts, sue or be sued, etc.
Shareholders of a company are not liable for the company’s debts.
If the company goes bankrupt, then a shareholder will not lose more than their investment (unless the shareholder has provided personal guarantees for the company’s debts). A creditor cannot sue shareholders for liabilities incurred by the corporation, even though shareholders are owners of the corporation.
A corporation is taxed separately from its owners and generally at a lower tax rate.
For example, a Canadian controlled private corporation incorporated in Ontario pays 15.5% tax rate on the first $500,000 of taxable income.
A corporation is able to hold after tax income and invest it in different projects without triggering any tax obligations for its owners.
In comparison, a sole proprietor conducting business in Ontario pays 40.16% income tax, when the taxable income exceeds $132,406.
Raising capital is often easier for corporations than for other forms of business registrations.
For example, a corporation is able to issue shares to those who invest money in the corporate business. Other forms of business must rely solely on their own money and loans.
Corporations often are able to borrow at a much lower rate than other forms of businesses. Banks usually consider loans to corporations as being a less risky investment.
Unlike a sole proprietorship or partnership, a corporation does not cease to exist upon the death of its owners.
Ownership would be transfer to another persons and the corporation would still live on. Such continuous existence gives the business greater stability and ability to plan over a longer term.