What You Need To Know About Incorporating in Alberta
There are many incorporation benefits that exist for many businesses. Yet many people do not understand what incorporating is means. They also do not know how incorporation benefits may apply to their Alberta business. The incorporation lawyers at Kahane Law Office in Calgary, Alberta are here to help you decide if incorporating your business makes sense.
What are corporations in Alberta?
Businesses can be run in a variety of ways. The two most common are for people to be sole proprietors or run their business as a corporation. A sole proprietor is when an individual runs a business under her or his own name. That person pays their own taxes, enters into leases and agreements on their own and has personal bank accounts.
A corporation is a legal entity. It can run a business. Individual owners can own the corporation. A number of individuals and/or other corporations can also own a corporation. A corporation has rights and obligations that are similar to an individuals. IE. they can both own land and open bank accounts. Corporations only exist because Alberta law allows them to exist. All incorporation benefits exist because the law creates them.
What Incorporation Benefits Exist in Alberta?
There are two main types of incorporation benefits. The first are incorporation benefits that involve taxes (Alberta and Federal). The second type of incorporation benefits in Alberta include limitations of liability.
Incorporation Tax Benefits?
The following are benefits that tax related incorporation benefits. They are both benefits to the corporation itself as well as to they shareholder(s).
- Lower corporate tax rates than personal
- More available tax write offs
- Income splitting with a spouse
- Deferred taxes
- Potential one time capital gain exemption
Liability Related Incorporation Benefits
Liability limitations are one of the best incorporation benefits. Liability is also knows as risk. Risk is limited because while a company can be sued, the person suing cannot seek funds from the shareholder(s) / business owner(s). Always consult with a lawyer because there are some other risks that shareholders still have. These include (but are not limited to) environmental contamination, limited employee pay, and fraud. That said, incorporation benefits help limit risks such as:
- Being sued for injury or damages to others
- not making debt payments
- defaulting on leases agreements
It is important to note that personal guarantees allow third parties to get around incorporation benefits for liability.
How do you know it is time to incorporate?
Lawyers and accountants can help determine if incorporation benefits are open to you. There are two main factors. These are the type of business you are running and the financial situation the business is in. From a legal perspective, if there is any reason that a business may be sued, it is probably a business that should be incorporated. From an accounting perspective, incorporation benefits are analyzed based on income, deductions, retained earnings, and capital gains.
The Cost of Incorporating in Alberta
The downside to incorporating is cost. There is a nominal cost for setting up a company. There is also a nominal cost for maintaining it from year to year. Corporations will have to file their own set of Alberta and federal taxes. There is also the cost in terms of time in maintaining a corporation. In most cases the incorporation benefits out way the cost. If wanted, here is more information on the advantages of incorporating in Alberta.
Call Today To Take the First Step To Having an Alberta Corporation
The incorporation lawyers at Kahane Law Office in Calgary, Alberta can help you understand incorporation benefits and the relative costs. You can also learn more about incorporation advantages with our video. We can be reached toll-free at 1-877-225-8817 (or tel. 403-225-8810 locally in Calgary, Alberta), or email us directly here.