As a year comes to a close many business owners begin to think about the Company and how it will fare in the upcoming year. The last few years in Canada have been tough on business with a not so great economy.
Some smaller businesses got started and struggled under a sole proprietorship or even a partnership but managed to get grounded and now the decision as to whether to incorporate the business is looming.
What leads to having or wanting to make this type of decision is things that are going on in the business. As a Company grows it accumulates both assets and liabilities, and there are legal issues that need to be covered. When a Company becomes a corporation then it is seen as a separate entity. So, if the business were to be sued for example, then in most cases this does affect the owners outside of the business. Being incorporated often restricts creditors as to what they can go after to collect a debt, meaning they cannot target assets outside of the Company. There are always exceptions however, and regulations are constantly changing so what may be applicable to one Company many not be the same as for another as it will partially depend on the circumstances as well.
One fallacy is that some who are going to incorporate believe that it totally protects them personally again any business tax issues. This is not really the case, and the CRA has a broad arm of the law to work with when it comes to going after directors for some tax issues.
Another reason a Company may be deciding to incorporate is to put them into a better tax position. This may be a good reason, but before making any decision such as this it is always wise to ask the opinion of experts that deal with the workings and issues of a business. For example, there are the lawyers who tend to the business legal matters. Then there are the accountants to tend to the financial compiling of the business data both for use by the business owners and the tax department for filings.
In respect to 2015 being a good choice to incorporate this is really not the deciding factor. Whether the pros to doing this outweigh the cons for your particular business is the real key. You need to know that your business projections for growth are solid and even if the economy falters are you going to be able to ride it through.
