Brandon M. Ament, Barrister & Solicitor
INCORPORATION
416-418-0889
brandon@amentlegal.com
The Advantages of Incorporation
The advantages of incorporating your business can be substantial. A corporation is a separate legal entity which can be formed either provincially or federally.
- As the corporation is a separate legal entity, the liability of the shareholders is usually limited to the amount that they have invested in the corporation. The personal assets of the shareholder are protected from lawsuits against the corporation. If the shareholders are also directors of the corporation they can be liable for some debts of the corporation such as HST payments in specific circumstances.
- The income tax advantage can be substantial for a profitable small business. A corporation pays separate corporate income tax, which is calculated separately from the shareholders' personal income. This corporate income tax rate can be significantly lower than the shareholder's personal income tax rate. This tax advantage is mainly a deferral of taxes until the profits are paid out to the shareholder. You can control how much income you retain in the corporation and therefore how much personal income tax you pay.
- Your business usually needs to be incorporated if you want to work as an independent contractor for a large corporation.
- You can take advantage of the Lifetime Capital Gains Exemption when you sell your corporation.
- Income splitting with family members. A spouse or family member who is over 18, who is not active in the business, can hold non-voting shares and receive a dividend from the corporation.
- Dividends can be paid out after retirement. A shareholder can leave money in the corporation as retained earnings and the company can pay them out as dividends.
- Creating a corporation can significantly reduce probate taxes at death by utilizing a secondary will to address the transfer of shares after death.
The Disadvantages of Incorporation
There are great advantages to incorporating your business, however there are some cons.
- The startup and incorporation costs can be as high as $3,000.00.
- You are required to file a corporate tax return and an annual corporate financial statement in addition to your person tax return.
- Incorporation is the most complicated business structure. It is important to carefully structure the articles of incorporation and ensure that you have the proper share classes for your requirements today and in the future, deciding who will be shareholders, and how much control they have. Receiving professional advice from Mr. Ament, Toronto business lawyer, can help you avoid serious problems in the future.
Mr. Ament, Toronto business lawyer, offers a flat fee of $1,300.00plus HST to incorporate your federal or provincial corporation. This includes the organization of your minute book, by-laws, organizational resolutions and all disbursements.