ADVANTAGES OF INCORPORATING

1. Limited Liability. Number one reason why most people incorporate their businesses! Creditors are only able to seize assets of the company to settle outstanding debts, Accountant Vaughan. Your personal assets are protected.

2. Status. Your customers will view your business as larger and more prestigious.

3. Capital. If additional capital is required, a corporation is more attractive to those who have money to invest.

4. When a private corporation realizes a capital gain or a capital loss, other than on certain gifts, the portion of the gain or loss that exceeds the taxable capital gain or allowable capital loss is included in its capital dividend account. A positive balance (gains less losses in this account) may be paid out as a non-taxable dividend to resident shareholders, provided the appropriate corporate resolution has been passed and recorded and a special tax election form T2054 is filed with the CRA on or before the date the dividend becomes payable. Capital dividends are non-taxable for both ordinary and alternative minimum tax purposes. In addition to capital gains, the tax-free portion of proceeds from the sale of eligible capital property or capital dividends received from another
corporation may create a positive balance. A positive balance in the capital dividend account should be paid as soon as possible, as subsequent capital losses will reduce the amount otherwise available for tax-free distribution. The capital dividend account is also increased by the proceeds of life-insurance policies received, less the adjusted cost base (ACB) of the policy—which takes into account various factors that change an underlying investment value—upon the insured’s death. This account is reduced by the amount of dividends elected for payment. Consult Your accountant in Vaughan to determine how tax planning can create capital dividends.

5. Tax Savings. Although there is more record keeping required, there are significant tax advantages such as a lower tax rate.

6. Estate Planning Benefits. Since the corporation is a separate “person” under the law it does not expire when the shareholders die. Significant estate planning benefits may exist to help your family.

Disadvantages of Incorporation
As the corporation is a creature of statute, it is subject to some supervision by the Government of Ontario and it must conduct its affairs in accordance with the applicable statutes. For example, the constitution or by-laws of the corporation, the election of directors and the calling of meetings of members are all governed by the Corporations Act. In addition, a corporation is required to report certain information on a regular basis to certain departments of the Government.
Failure to comply with reporting or disclosure requirements could render the corporation and its directors and officers liable to certain penalties, including the cancellation of the corporation.

Incorporating your business in a high-quality, efficient and cost-effective way!

Call for more information. 416-419-2144