Have you been wondering if you should incorporate your business? Not sure what the benefits of doing so would be? Our small business accountants Chestermere experts are here to help shed some light on the issue.
At some point or another every small business usually asks itself whether it should incorporate. But that question only begets more questions. Where should I incorporate? At what time is it best to incorporate? In order to help you through the process, we’ve gathered some of the top benefits you can expect after incorporating your company.
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Federally or provincially?
The first question you need to find an answer for is whether you should incorporate federally or provincially. If your business does work across multiple provinces or territories, federally incorporating it may make your life easier. Just be aware that you’ll have to extra-provincially register your company in any jurisdiction it operates in. This can add up, as each registration costs money and requires annual fees to keep the corporation in good standing in each respective jurisdiction. The main benefits of incorporating your company federally are:
- Getting to use your business name and protecting it across Canada
- Being able to have a registered office location anywhere in the country
- Being recognized as a Canadian entity
If those three things don’t sound important to you or your business, then only incorporating at the provincial level is probably your best bet.
Main benefits of incorporating your business
The main benefits of incorporating your business can be broken down into five categories. They are:
Separate legal entity
By incorporating your business you create a legal entity that is separate from its members or shareholders. An incorporated business, under Canadian law, has the same obligations and rights as a regular person. It can acquire or possess assets, get loans, sue, and enter into contracts.
Limited liability
Going a step further, your corporation protects its shareholders and members by limiting their liability. Generally speaking, members and shareholders of a corporation will not be held personally responsible for the debts of a corporation. Should the corporation go bankrupt, members will not lose more than their membership fees and shareholders will not lose more than their investment.
Potential tax savings
This is usually the main reason for incorporating your business. Compared to the personal tax rate you receive as a sole proprietorship, the corporate tax rate is generally much lower.
Improved access to financing
A corporation can usually borrow money at a better rate than a sole proprietorship or partnership business could. In addition to this, banks usually see these loans as being lower-risk investments and are generally more willing to extend credit to corporations.
Continuous existence
Unlike a sole proprietorship or partnership, a corporation continues to exist should its owners or members become deceased or depart from the company.
Are you looking for an accountant Chestermere? Or a small business tax accountant Chestermere? Contact IAPC today and book your free consultation.
Whether or not you decide to incorporate your business ultimately comes down to your company’s current situation. Are there benefits to doing so? Absolutely. But there are also a whole slew of administrative and procedural regulations you must abide by if you choose to do so. IAPC would be happy to walk you through them, and help you make the best decision for your business.
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At IAPC, a leading accounting firm in Chestermere, our team of professional tax accountants can help you oversee all the necessary documentation required to file your taxes in a timely, efficient, and accurate manner.
To find out more, contact us at 1 (403) 605-6887 or fill in our online contact form.
