Advantages of incorporation for Business

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Advantages of incorporation for Business

13 Dec, 2021
Why incorporation is better: Incorporation is better comparatively than sole proprietorship or partnership structure. Corporation has its own legal entity and provides protection from liability from owners. Although corporation required significant more paperwork but has lower tax burden compare to sole proprietorship. The corporation also provide opportunities for tax planning at corporate level as well as at personal level.

Sole proprietorship pays higher tax on profit as compared to incorporated businesses due to lower tax rate up to net income of $500,000.

Incorporated tax rate: BC Incorporated company pay a combine 11% tax (9% Federal and 2% Provincial) on active income up to $500,000.

Advantages of Incorporation:
Main advantage of Incorporation is limited liabilities. In the event of a legal issue, sole proprietorship business owner would be 100% responsible and cold risk losing personal assets/saving. The incorporation limits the liabilities to the company only, so company owners/shareholders assets/savings are protected.

Other advantage of incorporation is that profit could be accumulated ion the company over its life and paid out to company shareholders when they retire each year by doing minimum tax planning. Incorporation also provides an opportunity to pass on the business to next generation with estate planning.

Incorporation offers several other advantages to company shareholders compared to sole proprietorship owners such as income splitting.

Finance and loans probability:
A corporation may have access to lower-cost debt financing than a sole proprietorship business.

Being a company, clients perceive differently and value higher which can result in getting high net worth clients than a sole proprietorship business.

Should you incorporate a business?
Before you decide, you should talk to your accountant and lawyer about your unique situation. They'll be able to advise you whether incorporation is better for you or not.

We are here to help. We can assist in determining what share structure meets your personal and business goals.

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