How and why do you incorporate your business?
Incorporating Your Business in Canada: A Guide to Legal Protection and Growth
Many entrepreneurs just starting out with a new business in Canada decide to incorporate. It is often the first step to ensuring the business’s financial security. Creating a registered corporation is a lengthy exercise with many steps, so it is advisable to work with a business lawyer in Clarence-Rockland who is familiar with the process.
Why Incorporate Your Business?
Incorporation creates a company as a legal entity, distinct from its owners – and that’s important for some very compelling reasons:
- Liability Protection: The protection of personal assets is one of the most common motivations to incorporate. When you incorporate, you limit your personal liability for the debts and obligations of your business. And because your business is established legally as a separate entity, if your business ends up in litigation and, in the worst case must declare bankruptcy, your personal assets, such as your home and savings, aren’t at risk.
- Tax Benefits: Incorporation may enable you to reduce your corporate taxes. Corporations tend to be taxed at lower rates than individuals and may be eligible for tax deductions and credits not available to those operating as sole proprietors or general partners. The savings can be substantial, allowing your corporation to spend more of its profits on investments to grow your business.
- Greater Credibility: Customers, suppliers, and investors may see a corporation as more stable and creditworthy. This can speed up transactions, facilitate the raising of capital and allow the corporation to borrow money at a lower rate.
- Easier Access to Capital: Corporations often find it easier to secure capital. They can bring on investors by issuing shares with dividends, without necessarily sacrificing control of the corporation. Bringing on investors allows the corporation to utilize capital to expand the business through development projects.
- Limited Liability: As a shareholder, you are not responsible for the corporation’s debts and liabilities. Should the corporation go bankrupt, your personal property as a shareholder is protected and your loss is limited to your investment in the corporation.
How to Incorporate Your Business in Canada
The process of incorporating a business in Canada involves several steps. Here’s a simplified overview:
- Choose a Business Name: Coming up with a distinctive name that conforms to provincial or federal naming requirements and perform a search to ensure it’s not already in use or trademarked.
- Submit the Necessary Paperwork: Depending on whether your corporation will be federally or provincially incorporated, you must file certain documents with the appropriate authorities. The articles of incorporation will describe the share capital structure of your corporation, and designate the first directors of the corporation.
- Pay the Filing Fees: There are fees associated with incorporating your business. These vary by jurisdiction and are required to process your application.
- Obtain the Necessary Licenses and Permits: Depending on your business type and location, you may need additional licenses and permits to operate legally.
It could be a very complex process to deal with different governmental authorities, especially if it’s the first time incorporating a new business. A professional lawyer in Ottawa can help accelerate the process of drafting and filing all the essential documents.
Incorporation Assistance from Experts
The decision to incorporate your business as a legal entity is a significant step forward that can increase protection and credibility. With the right preparation and assistance, you can complete the process successfully and build a strong foundation for your business’s future in Canada.
With specialized services dedicated to business law in Clarence-Rockland and Ottawa, our team can offer advice and legal assistance where necessary in the process of incorporating a business. To learn more about how we can help you get started, contact Simard & Associates.
