Register a Business Name Register a Corporation Benefits of incorporating a business in Canada
Protect your personal assets from creditors
Shareholders are not responsible for a corporation's debts. If your corporation goes bankrupt, your shareholders only lose up to what they invested. If you haven’t incorporated your business, your personal assets are linked automatically to your business. This may include your car, your home, your investment accounts and even assets you obtain in the future. Additionally, if you were to file bankruptcy within your business, your personal assets could be used to repay your debt. If you were to file personal bankruptcy, your business could become an asset that can be liquidated to repay your debts. Incorporation protects your business from all of these scenarios.
Easier access to capital
Corporations can borrow money at lower rates. They can also raise money by selling shares or bonds to investors (called shareholders). Incorporating generally makes it easier for your business to raise capital or apply for a loan by a sense of legitimacy to your business. When you incorporate, it also means you can open up a bank account and start building a line of credit, which, for a small business owner, is a necessity.
Protect your personal assets from lawsuits
Keeping you and your family safe and secure is a huge benefit of incorporating a business. Without incorporating, your personal assets may be at risk to anyone filing a lawsuit against your business. That means if a customer trips or slips in your store and takes you to court to collect damages, you may be personally liable.
Build a better reputation
Your business’ reputation isn’t just based on the amount of Yelp and Google reviews you get or the good work you do within the community. Incorporating can help establish your legitimacy and build trust with potential customers. This is a huge plus for your business’s branding.
Lower tax rates
Corporations are taxed separately from their owners. Corporate tax rates are generally lower than personal income tax rates. Another benefit of incorporating your business, and one of the most crucial to leverage, are the many tax deductions that are available to incorporated businesses. When you go from being a sole proprietor to a corporation, there are numerous deductions at your disposal that are not available to individuals.
Corporations live on until they wind up, amalgamate, or give up their charter (for example, when they go bankrupt). With other business structures, a business stops existing when the owner dies. Legally, by incorporating, you can protect your business forever. Your business can still be sold or closed, but if neither of those things happen, your business will be in perpetual existence because it is its own entity. The business can remain operational and profitable, no matter what happens to those who are involved in the business.
Easier to transfer your business
Let’s say that you want to pass your business on to your son or daughter as you get older, but only want to do so in the event of a sudden illness. It may be easier to transfer ownership and funds when the business is a corporation than it is if you are running a sole proprietorship.
Stronger record keeping
When your business is a corporation, the government requires you to provide way more details at tax time. You’ll need to supply them each year, which may mean paying a bit more for a tax professional and detailed bookkeeping. Although additional record keeping is often seen as a disadvantage to incorporating, it means you’ll have a clear, accurate picture of the overall health of your business, which is a pro in our view.