Why You Should Incorporate Today
When you start a business venture, you usually want to keep costs down. Most people just start selling their goods or services as an individual. This is called being a sole proprietor. Is easy, quick, has no required set up and inexpensive”¦ But is it really. There are many incorporation advantages. Always remember that it is essential to keep a properly maintained corporate minute book. Without one you may lose these incorporation advantages. Certain professional, such as doctors and lawyers, can incorporate as a professional corporation. Learn more about professional corporations here. Our Calgary, Alberta lawyers can help you understand more. Call Kahane Law Office 403-225-8810.
Incorporation Advantages: Why it is Important to Incorporate your Business in Alberta
The following are the key reasons as to incorporation advantages. While there are some set up costs, successful business will save money and enjoy other protection, even in their first year of incorporating.
Your Company Saves You Taxes
There are many taxes related incorporation advantages in Alberta. Here are some of the examples.
Incorporate for Income Tax Savings
Canadian tax rates for individuals are much higher than the tax rates for companies. Your company will pay the lower rate and you are just taxed on the income you draw. This incorporation advantage, you are also able to take out a dividend which may be taxed at a lower rate than your personal income tax.
Incorporate to Pay Taxes Later
When you earn money as an individual, ie you are a sole proprietor without a company, you are taxes in the year that you make the money. When you incorporate, you are able to take out the money that you need and pay tax on that amount but any money that you do not need, can stay in the company and not be taxed at your personal income tax level.
Incorporate to Income Split
Canada has a graduated tax scale. As you make more money, your tax bracket and tax rate gets higher. With a company, your corporation can pay income to all employees and dividends to all shareholders (even if that shareholder has no right to vote or control the company). This means that a married couple may be able to pay less tax on the same amount of household income if they are incorporated. This incorporation advantage does get a bit tricky if your relationship turns sour, however many of those issues would still exist without your spouse being added.
Incorporate to Save Capital Gains
There are exemptions to the capital gains tax for some companies. You may be able to avoid paying capital gains if you sell your corporation. These savings can be very significant to a person who sells the assets to their business that is not incorporated. In a successful company, this can be the single biggest one time incorporation advantage.
Limited Liability: Limit Your Liability is a Key Incorporation Advantage
If you do business with someone or another company and they suffer damages they may sue. If you are not incorporated, then they will sue you as an individual. This means that they may be able to seize your assets, including your home. If you do business through a corporation, then any damages suffered, will attract liability to the corporation.
There are no incorporation advantages to intentional fraud. Unless you have committed fraud or a few other intentional actions to harm someone, it is very difficult for someone who is suing to seek damages from the shareholder of the company. This means that any recovery of damages is limited to the assets of the corporation. Since your corporation would normally not own your home, even if you do business from it, it is protected.
Succession planning is the term used to describe when you pass on your business to someone else. There is more opportunities to sell or pass on your business if it is a corporation than if you are a sole proprietor. As the details are very specific for this incorporation advantage, please ask one of our lawyers about how this will work with your business.
Credibility to Customers, Lenders and Buyers
An incorporated business is usually seen as more stable and reliable than some person who just runs a business. It can show a level of sophistication and stability that may not be perceived with a sole proprietor.
Access to Money
A corporation can sell shares to raise capital. Shares can be sold with or without voting rights. This means that you do not have to lose control of your company. Adding share holders also allows you to take out some of the equity that you have built in your company.You can also limit the number of shares being sold. Another option a company has is to issue debentures. These are loans that people can make to the company. These are financially significant incorporation advantages.
Finding a Incorporation Lawyer in Calgary, Alberta
The incorporation lawyers at Kahane Law Office can help with your business incorporation legal needs. You can soon enjoy incorporation advantages. We will discuss incorporation advantages with you. You can also learn more about incorporation advantages with our video. We can be reached at 403-225-8810 locally in Calgary, Alberta or toll-free at 1-877-225-8817or email us directly here.