Is It Time To Incorporate Your Business?

Are you considering incorporation? Are you currently in the process of weighing the advantages and disadvantages of doing so?

We can help you through the process of deciding whether or not incorporation is the right choice for you. 

We don’t want you to underestimate what a big decision it is. It has a substantial impact on your business and how it operates. The initial upfront cost and associated, ongoing costs need to be taken into account during your decision-making process. It’s also worth noting that incorporation has its negatives: corporations are legally required to submit yearly legal and tax filings that pose an administrative burden on your business, and if you end up operating at a loss, it will be harder to obtain tax breaks than if you were operating a sole proprietorship. Potential incorporators may have heard that corporations enjoy reduced taxes, but this is on a case-by-case basis. Many end up paying more; you’ll need to do the homework to figure out which category you fall in (or better yet, get a professional to figure it out for you). 

With that being said, corporations do experience a number of advantages. As mentioned, some incorporated businesses benefit from a lower tax rate and/or tax deferrals. Gains made on the sale of shares are also tax-free up to a certain threshold, which puts more money in the pocket of your business. Since corporations are a separate legal entity and effectively live on forever, it can make it easier to transfer assets to loved ones and successors in the event of your death/retirement/exit from the business. 

The concept of being a ‘separate legal entity’ comes with a particular advantage: limited liability. This essentially refers to the fact that you aren’t held personally accountable for debts accrued by your business. In the event that your business ends up defaulting on loans, banks/investors won’t be able to seize your personal assets in an attempt to recover what they are owed. Being ‘incorporated’ acts as a security blanket; you don’t have to worry about your house and other personal property being taken as collateral.  

Even knowing the benefits and costs associated with incorporating your business, you may be uncertain about whether it’s right for you. The reality is incorporation should not be undertaken with a one-size-fits-all mentality, particularly when it comes to small businesses.

You’ll need to look at your finances to determine if you can accommodate the cost, figure out if it will have a positive impact on your taxes, and think about how important being a ‘separate legal entity’ is to you. A professional can help you with all of this. At GEPC, we offer an incorporation advisory service so you can find out if it’s the best choice for you moving forward. In the event that you do incorporate, we’ll guide you through the process and make sure you’re set up as tax efficiently as possible. 

Avoid making the wrong decision, or making mistakes that will cost you later. We’ll go through all the relevant factors and help you determine what your best option is. It’s time to get some peace of mind when it comes to your business.   

Schedule a free consultation at gregevans.ca or (705) 880-2224 to learn more about what we have to offer. It all starts with a conversation.