To Incorporate or Not to Incorporate, That Is the Question.

Whether it is time to incorporate is a question often pondered by business people. There are two primary reasons to incorporate a business:

1.       Your business can realize tax savings through utilizing a corporate structure; and

2.       Your business activities are risky and you would like to place this risk on the corporation’s shoulders instead of your own.

Your accountant can help you decide if there are potential tax savings available through use of the corporate business structure. However, tax should not be the only consideration in deciding whether to incorporate. Your business may not yet meet the income threshold that justifies incorporation but you may face significant business risk that could none-the-less justify incorporation. A corporation is essentially a person in the eyes of the law. It can sign contacts instead of you personally signing them and it can be sued without necessarily engaging your personal liability.

Take for example a fledgling business that is contracting with several other businesses such as raw material suppliers, product distributors, and independent contractors. Income and assets of the business are low and a claim under any one of the contracts could far exceed what the business could pay. A lawsuit against this unincorporated sole proprietor would engage the liability of its owner/operator who could lose their house and savings. If the business was incorporated, it could sign agreements in its own name which would place only its own assets at risk. This leaves the shareholder (owner) free from claim and protects their personal assets.

If you have any questions about incorporation you can call us at (902) 826-3070 or email us at info@highlanderlaw.ca to set up a meeting with one of our lawyers at our Tantallon law firm. You can also schedule a no commitment Issue Review Consult for $250+HST where you have the opportunity to explain your situation to a lawyer and get basic advice before deciding whether or not you'd like to retain us.  

 By: Dianna M. Rievaj, MBA, LLB - Founding Lawyer

The information and materials on this blog are provided for general informational purposes only and are not intended to be legal advice. Nothing contained on this blog is legal advice or constitutes a legal opinion. While it is our goal to provide information which is current, legislative changes and court decisions, among other matters, may result in some information no longer being current or accurate. You should consult a lawyer before relying on any information. The views expressed herein by individual contributing lawyers posting entries to the blog are solely those of the authors and should not necessarily be attributed to or considered representative of the firm of Highlander Law Group Lawyers