Benefits of Incorporating a Business
Incorporating a business offers numerous advantages, such as:
1. Creditor Protection: One of the main reasons entrepreneurs choose incorporation is to protect their personal assets. In the event of a lawsuit against your corporation, your personal assets are generally protected. However, personal guarantees or specific circumstances may still put personal assets at risk.
2. Perpetual Existence: A corporation continues to exist until it is voluntarily or involuntarily dissolved. This ensures business continuity even if there are changes in ownership or shareholders.
3. Ownership Flexibility: Incorporation allows for the issuance of shares, which represent ownership in the company. The company's articles of incorporation outline the authorized types of shares that can be issued, including voting and non-voting shares.
Next Steps after Incorporation
Once you have decided to incorporate your business, several necessary steps await:
1. Issue Shares: Establish ownership by issuing shares to shareholders. The articles of incorporation define the types of shares authorized for issuance.
2. Select a Year-End Date: Determine the fiscal year-end date, which will be used for tax reporting purposes.
3. Apply for Canada Revenue Agency - CRA Business Numbers: Register for the necessary CRA business numbers, such as the Business Number (BN) and the Goods and Services Tax/Harmonized Sales Tax (GST/HST) accounts, if applicable.
4. Open a Corporate Bank Account: Maintain a clear separation between personal and business finances by opening a dedicated bank account for your corporation.
5. Maintain a Vehicle Log: If your corporation owns vehicles, keep a comprehensive vehicle log to track business-related usage for tax purposes accurately.
6. Determine Salary vs. Dividends: Consult with a tax professional to understand the implications of paying yourself through a salary or dividends and make informed decisions.
Incorporating a business in Canada offers several benefits, such as protection from creditors, perpetual existence, and ownership flexibility. However, it is crucial to consider the associated costs, seek professional advice, and fulfill all the legal obligations that come with running a corporation. By carefully evaluating these factors and following the necessary steps, you can establish a strong foundation for your business and successfully navigate the complexities of running a corporation in Canada.
Are you interested in learning more? Please click on the following button to read our blog on Canadian corporations and forms of business ownership.
**The information provided herein is a general background of contractual, technology and intellectual property law concepts. It does not constitute legal advice, and should not be relied upon as legal advice. Athena Innovation & Legal, nor the author, make no express or implied representations or warranties in respect of the information, including but not limited to the accuracy of the information.**
