Many people have a misconception that to incorporate your business, you would need to be a large company. However, this notion is not true. Anyone can incorporate a business if they meet the legal requirements.
A Standard Corporation is a single entity which may be comprised of individuals or a company but is separate from its owners. Among the most important features of a corporation is limited liability. This means that its owners can participate in the share of profits, but not the corporation’s liabilities.
Since a corporation is a separate entity, you are not personally liable for any loss from the corporation. Any losses incurred by the corporation would be limited to the corporation and your personal assets would not be involved. For example, any litigation towards the company would be only limited to the corporate umbrella.
Along with limited liability, corporations possess the ability to own assets, enter contracts, sue, or be sued, and borrow money. The creation of a corporation occurs following the proper filing of the Articles of Incorporation also referred to as a Charter or Certificate of Incorporation with the relevant government department or authority.
Every corporation is comprised of shareholders, directors, and officers. The directors are responsible for supervising and managing the corporation’s affairs. When you incorporate your business, you must at least have one director appointed. This individual can be you as a business owner. In some provinces, there is a requirement that at least 25% of all directors of a corporation are required to be a resident of Canada. However, this is subject to change. Therefore, it is important to verify the requirements prior to creating a corporation.
Since taxes are a big part of business in Canada, it is important to know that as a corporation you would have significant tax advantages. The corporation would be viewed as a separate entity and therefore it would have a separate tax account from your personal tax account. You would have a significant tax advantage because corporations are taxed at a lower rate.
You can keep the funds in your corporate account, and you can transfer the amount at your convenience when you feel you would have a lower personal tax rate during a given year. Taking advantage of this added flexibility would save you significant amount of your personal taxes.
It is true that the initial registration fee of a corporation is higher than registering a Master business license. Over time Master business license would cost more because you would need to renew it every 5 years. The fee for a corporation is a onetime fee. You would not need to worry about renewing it.
Moreover, corporations would also have the added benefit of a name protection. When you create a corporation, a Nuans report is used to verify if the given name is available to register in Canada. When you register your corporate name, it is reserved for you, and you only have the authority to use it. Any other business using the same name can be subject to litigation by your corporation, since the authority to use the name only belongs to you. This advantage of name protection is highly important if you are creating your own brand in the Canadian marketplace.
Overall, incorporating your business has the advantage of Taxes, Name protection, and limited liability. If you would like to know more about how to register your corporation, please follow the link below.
If you have any questions, please contact us anytime and one of our highly qualified business specialists would be happy to assist you.
Get Started with Your Entrepreneurial Journey