Business Incorporation Services
There can be significant benefits to business incorporation.
Overview: There are three main business structures used by small businesses in Canada. These structures carry there own advantages and disadvantages.
A sole proprietorship is the simplest way to carry on business. The individual is the sole owner of the business. The sole proprietorship business and the owner are one and the same. All benefits from the business accrue to the sole proprietor and all obligations of the business are the responsibility of the sole proprietor.
The main disadvantage of sole proprietorship is that the individual is fully exposed to personal liability with respect to any and all claims relating to the business.
A partnership is established when two or more people agree to pool their financial, managerial, and technical resources in order to operate a business for profit (partners of a partnership can also be a corporation).
Each partner owes every other partner a duty to act in the best interests of the partnership. Like a sole proprietorship, a partnership is not taxed as a business that is separate from its owners. The income from the partnership is included as part of the partners’ personal incomes and taxed accordingly.
A corporation is distinct from a sole proprietorship and partnership in one fundamental way: it is a separate legal entity. It has a legal existence independent from the owners of the business. It can buy, own, and sell property, sue and be sued, and must file its own income tax return.
There are three main groups of people involved in a corporation:
- Ownership: They are the owners of the corporation. Common shareholders are entitled to vote at shareholders’ meetings on company-related issues such as electing the board of directors and choosing an auditor. Most shareholders are not involved in managing the affairs of the corporation.
- Liability: Shareholders’ liability for debts of the corporation is limited to the price they paid for the shares they own.
- Profits: Shareholders receive a portion of profits based on the type and number of shares they own in the corporation.
- Entitlement: They are entitled to share the assets if the corporation dissolves, after all debt obligations have been satisfied.
Board of Directors
- The board of directors is elected by the shareholders to guide the affairs of the corporation.
- Directors owe a fiduciary duty to the corporation, and must disclose any personal interest in any business in which the corporation participates.
- Officers are hired by the board of directors. They are responsible for the day-to-day management of the corporation
- Unlike shareholders, officers can legally bind the corporation to contracts they sign on its behalf.
Incorporating a company offers you many advantages, even if you are a one-person business. Some of these advantages are:
- To reduce its income taxes and that of its owner.
- To protect the personal assets of its owner.
- To provide Greater control in transferring ownership.
- To protect the business name from being assumed by others.
- To give the business greater image and credibility.
- To make yourself more attractive to potential employers.
What is the process of incorporating a business?
Business Name: You will need to decide on a business name for your corporation. The name cannot be used by any other corporation. A numbered company can be used in conjunction with an operating name.
Nuans Report: A nuans report is needed, which shows the names of companies with similar name and verifies that the name is available to be used by the corporation
Incorporation Area: You need to know whether to incorporate federally or provincially. The decision will be based on where you will be doing business.
Professional Service: A professional should be used who specializes in incorporating businesses.
This professional should not be limited to the legal aspect of incorporating the business but should also be familiar with personal tax planning and how it relates to the corporation.
Ownership: Ownership of a corporation may be transferred through the sale of shares without substantially disrupting operations or creating the need for complex legal documentation.
What professionals can I use to incorporate my business?
You should seek professionals that will not only provide you the service but also will provide you information.
- Legal, Tax or Business Advisors,
- Financial Planners, etc.
Feel free to contact us for more information on this subject.