Is a corporation right for me?

A corporation is a separate legal entity that has the same rights and obligations under Canadian law as a natural person. It can acquire assets, obtain a loan, enter into contracts, sue or be sued and even be found guilty of committing a crime. A corporation’s cash and other assets belong to the corporation and, not to its shareholders.

What are the benefits of incorporating?

The corporate tax rate is generally lower than the individual tax rate, therefore, incorporation can offer some fiscal advantages. An accountant can help you assess whether incorporation will be tax efficient. Another advantage is the limited liability to its shareholders. As a general rule, the shareholders of a corporation are not responsible for the corporation’s debts. In other words, shareholders will not lose more than what they have invested into the company unless they have provided personal guarantees. However, if a shareholder is also a director, then he/she can be liable for the debts of the corporation. In other words, the person would not be liable for the corporation’s debts as a shareholder, but as a director. For more information, please visit:
https://corporationscanada.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs06641.html#toc-01

Who can incorporate?

In order to incorporate a company, at least 25% of its directors must be resident Canadians (Permanent residents of Canada or Canadian citizens living in Canada. The requirement is more than 50% for certain sectors.

Should I incorporate federally or provincially?

It depends on what your company plans to do. A federally incorporated company can operate its business using the same name all across Canada. So if the plans involve expansion to having a physical presence in other provinces then federal incorporation is ideal. The downside of incorporation federally is that federal
corporations involve more paperwork and may also cost more than provincial corporations in the long run.

Should I incorporate a numbered or named company?

Legally, both numbered and named companies offer the same liability and tax advantages. However, named companies cost more to incorporate as it requires name searches to be performed for desired names. Numbered companies do not contain any unique or descriptive names and are randomly generated by the
ministry whereas named companies are uniquely identifiable.


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