Incorporating your business in Canada
A corporation is a separate entity with its own legal personality. Corporation law (at times referred to as company law), is the law enforcement body that governs the formation, governance, and dissolution of corporations. The corporation is the one of the most dominant form of business organization in Canada.
In simpler words, incorporation is the legal process whereby a newly formed business entity is legally created in order to protect the owners of a business from legal liability.
Features of a corporation:
- Once a business is incorporated, it has separate legal personality in the sense that it is a legal person separate and distinct from its shareholders, directors and officers
- Further, a corporation has perpetual existence in that it continues to exist until it is liquidated or dissolved. The death of a shareholder, even if he or she is the only shareholder, does not affect the existence of the corporation. Corporations therefore are a relatively stable form of business organization
- Shareholders who invest in a corporation enjoy limited liability in that they are not liable for the debts or other obligations incurred by the corporation
- The structure of a corporation consists of shareholders, directors and officers
Incorporation in Canada and its link to taxes:
Once a business is incorporated, the company is most likely subject to lower corporate income tax rates. Generally, the tax rates for corporations are more favorable as compared with the individual tax rate.
Interestingly, once a business is incorporated, it opens many avenues for saving taxes. For instance, the option of income splitting between family members in corporations helps lower the tax burden resulting in tax savings, amongst other options.
Choosing between Federal v. Provincial Incorporation
As a business owner, you have a choice where you can incorporate your business at the federal level with Corporations Canada or incorporate in a specific province or territory. Each one has set of advantages and disadvantages.
For instance, a federally incorporated business has benefits including, the business has a right to carry on business activities anywhere in Canada, wider recognition, heightened name protection and can operate online without the need of an intermediary.
On the other hand, depending on the circumstances a business owner might choose to incorporate his/her business provincially to exercise advantages such as: lower cost of incorporation, province specific deductions, ease of business selection.
It is the best to discuss these aspects with an expert to understand the best route for your business. At Toronto Tax Boutique, based on your circumstances and your objective, our business and tax experts suggest you the best choice for your business.
What are Professional Corporations?
- Pharmacists among others
Why hire an expert for incorporation?
Experts at Toronto Tax Boutique are experienced in incorporation laws and taxes. For the past years, we have been handling a number of clients across various industries and have simplified the incorporation process for them. We can help you take the next step into growing within your profession.