Incorporation
Guiding you through the incorporation process to take the next step in your business growth
Guiding you through the incorporation process to take the next step in your business growth
About incorporation
A corporation is a legal entity that is separate and distinct from its owners, known as shareholders. It is created through the process of incorporation under the laws of a particular jurisdiction. Corporations have many of the same rights and responsibilities as individuals, including the ability to enter into contracts, own assets and pay taxes. One of the key features of a corporation is limited liability, which means that the shareholders are not personally liable for the debts and obligations of the corporation. This makes corporations an attractive choice for entrepreneurs and business owners looking to protect their personal assets while conducting business activities.
Advantages of corporation
- Limited liability of the corporation’s shareholders, directors and officers
- Lower income tax rates on revenue earned inside a corporation (for example, 12.2% tax rate in Ontario on active business income up to $500,000)
- Opportunities for tax benefits such as the Lifetime Capital Gains Exemption
- An operating company/holding company structure can introduce further benefits such as creditor proofing and income tax deferral
Disadvantages of corporation
- Higher costs to establish the corporation (around $500 initially and then $750/year)
- Increased administrative burden in maintaining a corporation year over year (annual resolutions, annual corporate returns and annual tax returns)
What is a professional corporation?
Doctors, lawyers, dentists, chiropractors, registered nurses, social workers, veterinarians, optometrists, pharmacists and other professionals, can incorporate a professional corporation to significantly reduce their taxes.
Professional corporations essentially confer to professionals the same tax advantages enjoyed by corporations, such as tax deferral and investment. The only distinction is that professionals are not afforded limited liability that ordinary corporations enjoy.
Reduce your taxes
Incorporating a professional corporation will allow you to reduce your overall tax burden thereby providing you with greater investment earning capacity on your discretionary income. A professional corporation will enable you to pay tax only on the income that you draw out of your corporation as opposed to all of the income you earn if you were to earn it personally. The remaining funds can be invested and garner a far greater earning capacity than you would otherwise enjoy if invested personally.
