5 Reasons You Should Incorporate Your Business
One of the first decisions faced by entrepreneurs when deciding to start a business is whether to incorporate. Many people do not understand the benefits of incorporating and whether to incorporate federally or provincially. Mike Greenberg from Treadstone Law explains “many clients come to our office looking for another service but once they understand the value of incorporating, they set up a corporation.” Especially with Toronto’s startup scene booming, a wider understanding of the legal complexities of starting a business and incorporating is increasingly important.
...understanding the legal complexities of starting a business and incorporating is increasingly important.
First you must decide whether you want to incorporate. Once that has been determined then it is time to decide where to incorporate. You can incorporate federally or provincially. Treadstone Law has its Canadian office in Toronto however, offers incorporation in every province.
1. Limited Personal Liability
Starting a business often requires a substantial investment and can put your personal assets at risk. If you are running your business as a sole proprietor, a lawsuit against your business threatens your personal assets. Incorporating your company creates a separate legal entity. This provides greater protection to your personal assets and limits personal liability.
2. Tax Benefits
Nobody likes taxes. In some cases, having a corporation can provide you with tax savings. You can also take advantage of increased flexibility and tax benefits associated with incorporation. Some circumstances also warrant tax-free capital gains.
3. Employee Benefits
You can provide tax-free benefits to your employees. While businesses organized in other ways can take advantage of this as well, corporations are treated more favorably.
Incorporating your business provides you with better access to capital and grants. There are a number of grant, loan and investment organizations in Toronto and throughout Canada who require you to incorporate before providing you with financing. Most investors require your business to be incorporated. The benefits of incorporating are more attractive to potential investors.
5. Perpetual Existence
For most entrepreneurs, it makes sense to incorporate. However incorporating does come with a few additional administrative requirements. Other issues related to incorporation include deciding whether to incorporate federally or provincially. Determining whether you need to register your business extra-provincially. These topics are covered in later blog posts.