Small businesses start as a sole proprietorship or partnership, and after become incorporated after business has grown.
Should you incorporate your business?
Advantages of incorporating:
- Limited liability: liability is limited to the amount invested in the company.
- Unlimited life: the corporations will continue to exist even the owner (shareholder) die or leave the business.
- Optimizing your income and your taxes: By receiving income from the corporation as dividends or salary.
- Potential tax deferral: business tax rates are lower than personal tax rates.
- Income splitting: you can redistribute income to the family members, who are the shareholders of your company.
- Raise money is more easy: the company can raise money by equity financing.
- SBD: You can reduce your net corporate business tax if the corporation qualify for SBD( small business deduction).
Disadvantages of incorporating
- More paperwork
- More expensive
- Separate tax return
- Limited liability is not really always limited, because the lending institutions request personal guaranties from the business owners.
For more details, please feel free to contact us! (514) 585 0028, info@deklaration.ca
