In this blog we’re peeking an in-depth analysis:
Are you a business owner or individual wanting to start a business? Is it a good idea to immediately form a corporation? Then this blog is for you as it will help you with all of these answers.
Before we get into anything, let’s have a brief view of what is a corporation.
A corporation is a separate legal entity, like giving birth to a new entity or creating a new structure. Mostly, people think about a board of directors, multiple owners, and public shares involved in a corporation.
All these aspects might be genuine because every corporation needs shareholders or a board of directors to operate.
Why should you start a business in Mississauga, Ontario? Let’s talk about the main reasons for incorporating. See below:
Many people believe that their business idea will easily guide them through the process of incorporation. However, in reality, starting and maintaining a business is difficult and costly.
So why do people incorporate? Well, there are three core reasons.
Limited Liability: It helps you to get a layer of legal protection and secure personal belongings and assets. The shareholders or owners of your company do not have to pay for the loss if someone sues the company. This is true even if the company does not have enough money to repay the debts. Limited liability is one of the leading factors businesses attract to incorporate CRA.
Limited Liability doesn’t mean you can do whatever you want, but it might affect the owner. If the court finds something with criminal intent, they will order you to take your personal assets into their custody. A classic example would be the Nortel Case.
Additionally, professional corporations do not have limited liability security. If the corporation faces a lawsuit, treat the owners accordingly, considering them equally responsible for the loss.
Other than Legal and Taxes Sense, you might need to incorporate your business because it makes business and/or logistical sense. Without a doubt, incorporating gives your business a professional outlook when presenting it within the industry.
Ask yourself these questions to determine if it is the right time to incorporate:
Personal Tax rates are much higher than corporate tax rates here in Canada. On the personal side, you can easily go as high as 53.5%. By incorporating you can easily lower your business tax rate down to 12.2% here in Ontario, Canada.
From a tax perspective, you should consider incorporating your business when your Net Income goes above 45K. Having a corporation at 45K is beneficial due to tax advantages. Additionally, the corporation can generate any additional profits.
If you earn 45K, talk to our accountants at BG Accounting and Business Solutions. We can assist you in incorporating your business with CRA.
If your business is losing money, it’s usually best to operate as a sole proprietorship. This way, the losses can reduce your taxable income and result in refunds.
If any of the above-mentioned factors are relevant to your case, you should consider incorporating your business. Before making a quick decision, contact our experts at BG Accounting and Business Solutions for the best advice.
First, let’s briefly understand what a sole proprietorship is. After that, we can explore the main distinctions between a sole proprietorship and a corporation.
It’s important to think about when to incorporate your business into CRA to take the best step forward.
People often believe they should include it right away, but that’s not true. It can be expensive in the beginning.
BG Accounting and Business Solutions suggest you incorporate it when your company starts to receive high returns on its investment. Talk with one of our experts at BG Accounting and Business Solutions for the best advice.
Initially, there’s a start-up fee, which might be costly. Once started, then consider the other transitional costs if moving from a sole proprietorship.
Limited liability protection starts right away. I recommend incorporating it now instead of waiting for favorable circumstances, considering the benefits.
Start with a good and legal company name. The name can be of two types:
It helps to build the structure of your corporation. Standard incorporation will be the best if you are establishing a small business to CRA. You can also choose from the pre-defined articles for your business and amend them later.
The next step is to get the physical address of your corporation for any business activities. It allows you to receive and send legal documents under the right business name CRA. In addition, you must finalize the panel of the board of directors of a corporation.
Fees for Federal and Provincial incorporations vary per province.
When making a decision, experts suggest considering factors such as personal income, marital status, and goals. These factors can have an impact on your choice. Reach out to one of our accounting and tax expert at BG Accounting and Business Solutions for a prolific answer.
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