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CORPORATE AND COMMERCIAL

 

 

A frequently asked question by entrepreneurs starting a new business is: "Should I incorporate?" The answer to this question is usually: "That depends on your particular situation and your particular needs." We can review your needs and help you make the right decision for you.

Among the factors to consider in making this decision are the benefits of incorporating (versus operating the business as a sole proprietorship or partnership) and the implications that incorporation may have for the business. If you decide to incorporate, you will then have to choose between a federal and provincial incorporation

If you should decide that you are not ready to incorporate at this time, it is important to remember that the factors affecting this decision can change over time.

 

Here are some benefits of incorporating:

 

SEPARATE LEGAL ENTITY

 

The act of incorporating creates a legal entity called a corporation, commonly referred to as a "company." A corporation has the same rights and obligations under Canadian law as a natural person. Among other things, this means it can acquire assets, go into debt, enter into contracts, sue or be sued, and even be found guilty of committing a crime. A corporation's money and other assets belong to the corporation and not to its shareholders.

 

When a business is incorporated, its separate legal status, property, rights and liabilities continue to exist until the corporation is dissolved, even if one or more shareholders or directors sell their shares, die or leave the corporation.

 

LIMITED LIABILITY

 

The act of incorporation limits the liability of a corporation's shareholders. This means that, as a general rule, the shareholders of a corporation are not responsible for its debts. If the corporation goes bankrupt, a shareholder will not lose more than his or her investment (unless the shareholder has provided personal guarantees for the corporation's debts). Creditors also cannot sue shareholders for liabilities (debts) incurred by the corporation, even though shareholders are owners of the corporation. Note, however, that if a shareholder has another relationship with the corporation (for example, as a director) then he or she may, in certain circumstances, be liable for the debts of the corporation particularly money owed to Government.

 

LOWER CORPORATE TAX RATES

 

Because corporations are taxed separately from their owners, and the corporate tax rate is generally lower than the individual tax rate in each Province.

 

CONTINUOUS EXISTENCE

 

While a partnership or sole proprietorship ceases to exist upon the death of its owner(s), a corporation continues to live on even if every shareholder and director were to die.

 

This is because, in the case of a corporation, ownership of the business would simply transfer to the shareholders' heirs.

This assurance of continuous existence gives a corporation greater stability and better ability to arrange for succession.

 

Call us when you are ready to start your business or when you are looking for sound legal advice about your existing business.  We are ready to help.

 

Call us; we’ll be in your corner.