Should I Incorporate?
Early on in your business journey you’ll ask yourself whether or not you should incorporate. After working with companies for over 15 years – I have to say, this is definitely one of the most popular questions.
And understandably so. It can be confusing and overwhelming
So we’re simplifying and summarizing it for you.
Some advantages of incorporating:
- An added a layer of security against your own personal liability. When you’re a sole proprietor (another way to register your brand/company) your personal assets are on the line. When you’re incorporated, and a shareholder of that incorporation – you can’t be held responsible unless you’ve given a personal guarantee.
- As a general rule, shareholders are not responsible for debts
- Corporations are taxed separately from the shareholders/owners
- The corporate tax rate is generally lower
- If you incorporate, you determine how and when you receive income from the business and whether it’s through a salary or dividends.
Better access to money, loans and grants
- It’s often easier to raise money as a corporation – as you can offer shares to your investors.
- Borrow money at lower rates, corporations are seen as less risky
Some disadvantages of incorporating:
Higher startup costs
- Either through legal fees incurred when incorporating or directly related to the process of setting up the incorporation
Extra Admin Work
- Separate tax returns need to be filed
- Many documents need to be filed with Corporations Canada such as:
- Articles of incorporation
- Annual returns
- Any notices to your board, addresses, structure etc.
To learn more, you can go straight to the source: https://www.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs06641.html