Starting a new business in not easy and it can be a hectic endeavor. 

As a new entrepreneur one of the most frequently asked question is ‘What is the different between an Incorporation and Master Business License (MBL)?”

Here are key differences between an Incorporation and MBL:

Name Protection

With an incorporated company, you do have name protection. If another business chooses to operate under the same name, you can seek infringement because your corporation would own the name after incorporating. If another company operates with the same name, you can seek litigation and request that the business change its business name.

However, a MBL would not give you name protection. If you operate under a name, another business can openly conduct using the same name with no opportunity for you to seek infringement.

Tax Advantages

When you register a Master Business License, the business is considered as part of your personal tax account by the Canada Revenue Agency. This means that you are taxed at a personal level and any income generated by the business is considered your personal income.

With an incorporation, the corporation is considered as a separate entity. The corporation would have a separate tax account separate from your personal tax account. The primary advantage with an incorporated business is that you can keep the funds within the corporation instead of transferring the funds to your personal account. This gives you significant tax advantages as corporations are taxed at a lower rate. There is also added flexibility of investing, gaining loans, and providing pension to yourself as a director of the corporation.

Limited Personal Liability

Since the MBL does not separate you as an individual and as a business, you will be personally responsible for any form of liability. Liability would include personal loss of property loss that occurs during business and that also included any litigations.

However, an Incorporated business would have the advantage of its benefit of being a separate entity. This means that any loss would be incurred by the corporations and anything within the corporate umbrella. This would also mean that any litigation towards the company will only be limited to the corporation and individuals will not be personally responsible for any loss.