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Incorporation & Asset Protection

Why Incorporate?

There are two main benefits to incorporating your business:

The first is that your personal assets are protected from the debts of your incorporated business. There are some exceptions to this, but it is generally true in most cases. Personal guarantees given for business loans reduce your corporate protection, and corporations will not protect you from any fraudulent acts you commit. Check out our blog posts for more details on these exceptions.

The second is that corporate tax is far lower than personal income tax. This comes with a few caveats as well. Many accountants will tell you that the tax difference isn’t really important until your business is making about $75,000 a year in profit. You can also only enjoy the lower tax rate on investments you keep within the corporation, and not on consumer spending. There are also various other tax breaks, such as the small business deduction that make corporate tax treatment far better for the entrepreneur who is incorporated. Most of these benefits are the most relevant when higher levels of profit is being made.

Disadvantages of Incorporation

We aren’t here to push your business into a decision that doesn’t benefit it. That’s why we’re presenting you with the cons of incorporating as well.

The first con is that incorporation can be expensive. You have your legal fees, the government filing fees, and, most significant, are the increased accounting fees. Corporations require a separate, more expensive tax filing with the CRA, while an unincorporated business is filed with your personal income tax filing. Each corporation must have its own tax filing as well, so complicated corporate structures can get pricy for a business just starting out. These fees are tolerable for a business doing well for itself at a later stage, but should make business owners reconsider if they are pre-revenue or just starting to generate revenue. That being said, the benefits of not being liable for the corporation’s debts may far outweigh these costs if your business is in a high litigation risk industry.

The second con is that you lose the flow through benefits of an unincorporated business. Since unincorporated business profits are included in your personal income tax filing, you can offset loses from one business income stream against profits made in another income stream. This is only relevant to an entrepreneur with multiple unincorporated businesses. Business losses cannot be deducted against employment income.

The third con is that there are corporate law formalities you should comply with to ensure your corporation is valid. While there is some case law that suggests corporate law protections are not diluted by failures to comply with corporate law formalities, things can get messy if there are multiple shareholders and there is a dispute among them. There are alternative business arrangements, like a partnership, that can be less formal and more flexible in what requirements they have to ensure things run smoothly from a legal perspective.

Let's Get Started!

Check out our incorporation packages below. If you would like a free consultation, we’re happy to discuss your individual business needs to see if incorporation makes sense for you. Send us an email below or at info@drlawyers.ca and we’ll be in touch shortly!

If you’re ready to incorporate, click the link below to fill out our incorporation form. The more information you provide, the quicker we’ll be able to assist you! We look forward to connecting!

Let us help you!

If you need any help, please feel free to email us and we’ll get in touch with you to determine if we can help you achieve your goals.

Info@drlawyers.ca

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Full Incorporation

All required documents
Starting at$1500+ HST & Disbursements

  • Consultation regarding Pros and Cons of Incorporating
  • We file for you
  • All required documents included
  • Just signatures required on your part
  • Any questions regarding liability answered
  • Ongoing queries regarding future Corporate Law matters

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Full Legal Starter Package

Everything you need to get started for your business
Starting at$3000+ HST & Disbursements

  • Full Incorporation Package included
  • In-depth interview to learn about your business
  • Every contract needed to get your business started
  • Customized contracts directly dealing with your business
  • Calls with us on legal advice for routine matters
  • Business, Strategy, and Marketing consultations
  • Flag future legal issues you'll likely run into
  • We communicate with you in English with no legal jargon
  • Future edits to documents included
  • One flat fee making your legal spend predictable for your early stages
  • Access to our lawyers' referral networks of entrepreneurs and professionals
  • Discount on future services as your business matures
  • Work with entrepreneurial lawyers who understand why you started a business

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Free Consultation

You've got questions, and we've got your answers. A no-pressure, free consult is just a click away!