Why do I need to incorporate?

Separate Legal Entity

Incorporating creates a new legal entity called a corporation, commonly referred to as a “company.” It operates separately and makes decisions by resolution. A corporation’s assets belong to the corporation and not to its officials, directors, or shareholders.

Continues past the event of the “owners” death

When a business is incorporated, its separate legal status, property, rights, and liabilities continue to exist until the corporation is dissolved, even if one or more shareholders or directors sell their shares, die, or leave the corporation.

Limits Liability

Incorporation limits the liability of a corporation’s shareholders. As a general rule, the shareholders of a corporation are not responsible for its debts. If the corporation goes bankrupt, a shareholder will not lose more than his or her investment. Creditors also cannot sue shareholders for debts incurred by the corporation. Directors are also protected, except in certain exceptional circumstances, e.g. gross negligence or fraud.

Lower Corporate Tax Rates

Corporations are taxed separately from their owners. Because corporate tax rate is generally lower than the individual tax rate, incorporation may offer you some tax advantages.

Respectability

Generally, the public and business partners look more favourably on incorporated businesses than personally operated businesses. In fact, larger contractors will insist that a contractor be incorporated to do business with them.

Greater Access to Capital

It is often easier for corporations to raise money than it is for other forms of business.Corporations have the option of issuing bonds or share certificates to investors. Other types of businesses must rely on their own money and loans for capital. Corporations are often able to borrow money at lower rates than those paid by other types of businesses, simply because financial institutions and others tend to see loans to corporations as less risky.