Why Incorporate?

by | Feb 7, 2021 | Uncategorized | 0 comments

Congratulations on starting your business, you have joined an important sector of the Canadian economy, which boasts 1.18 million small businesses, and responsible for contributing 41.7 percent to the GDP generated by the private sector.

We, at Mercury Accounting, believe wholeheartedly in your dream and stand ready to provide our bookkeeping services if you wish to incorporate.

The Difference between Sole Proprietorship and an Incorporated Business

  • When you’re a Sole Proprietor, you are your business and your business is you. While an incorporated business is its own legal entity, separate from you.
  • As a Sole Proprietor, your income and losses are taxed on your personal income tax return, and leaves you unable to take advantage of valuable corporate tax benefits which could save you money.

Why you should Incorporate

  • LIMITED LIABILITY AND PROTECTION: Your corporation is its own legal entity, and you will not be held personally responsible for debts or lawsuits related to your business, protecting you from losing personal assets such as your car or home.
  • LIVES ON AFTER YOUR RETIREMENT: Your corporation will continue to exist after you retire, enabling you to pass it on to your kids or sell it.
  • LEGITIMACY: If you wish to do business with a large client or even internationally; a business incorporated under the Canada Business Corporation Act is an endorsement to partners who want to feel assured they are working with a legitimate business.
  • MORE ACCESS TO FINANCING: Banks are far more likely to invest and support an incorporated business, by offering lower rates for loans and other essential benefits, which enables your business to grow better and faster.
  • TAX ADVANTAGES: The income of your business is used more efficiently; by setting your own salary, balancing your expenses and capital investments, and being eligible for lower corporate tax rates. All of this saves you money and unlocks the potential growth of your business.
  • INCOME SPLITTING: The owner of a corporation is free to hire their spouse and children which can be yet another tax advantage, as the company can deduct the amount it pays them as an expense, and your family members’ income tax rates will be lower than your own, boosting your overall household income and the amount you save on taxes.
  • YOUR BUSINESS NAME IS PROTECTED: Incorporation protects your business name from theft and fraud, reserving for you the business name you will build up over the years.

Provincial or Federal Incorporation

The incorporation you choose is decided by where you wish to do business, and if you have plans for expansion in the future. A provincial incorporation will reserve your business name in the province, and if you only plan to do business locally, it is the best option. However, if you wish to do business in other provinces and have international partners, a federal incorporation will reserve your business name nationally and is the right choice for you.