To incorporate or not?
A common question asked by many small business owners...
One of the greatest joys of my work as a business lawyer is watching my small business clients develop and grow their business and helping them along the way with their legal needs.
Some of the more frequent questions I get asked a lot from my small business clients relate to incorporation: Do I need to incorporate my business? How much does it cost? What would you recommend for me?
Here are my answers:
With regards to incorporation, the reason most people would incorporate is to limit their liability.
When you are a sole proprietor, or in a partnership, your personal assets are at stake for any liability of the business.
But if your business is incorporated, your business liability generally stays with the business, since the corporation is a separate legal entity than yourself.
If you don't think the risk of liability is great for your business, then it is OK to operate as a sole proprietor or partnership.
As you grow your business, you may want to consider incorporating, as the more customers and sales you have, the greater your risk of incurring liability.
Running your business as a corporation also requires that you file corporate tax returns for your business, which is separate from your personal taxes.
You will probably need to hire an accountant to do that.
Another benefit of incorporation is that if your business is profitable, you can defer personal taxes by not withdrawing the profits from your business.
You will still have to pay corporate taxes, but the corporate tax rate is usually lower than personal tax rates.
Incorporating may also result in a more professional image for your business, and make it easier to include other partners or investors in your business in the future.
To start the incorporation process, the first thing I would do for you is perform a name search for the corporate name of your choice.
If the name is available, then you will be able to register your corporation under that name.
If you don't need a name for your corporation, you can just register your corporation and it will be assigned a number, instead of a name.
My fee for the name search and for incorporating an Ontario corporation is $800. This includes registration and filing fees, compiling a minute book, filing articles of incorporation and issuing shares.
For more information on incorporation and other legal matters about running your small business, feel free to contact your friendly Oakville business lawyer:
Angeline Gallivan, Barrister, Solicitor and Notary Public
1155 North Service Road, Unit #11
Oakville, ON L6M 3E3
Tel: 289 291 3977