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Why should I consider incorporating my business?

The law views a corporation as a legal entity separate from its owners (i.e. the shareholders). One benefit of this is that, with some exceptions, a shareholder does not assume personal liability for the debts, obligations or acts of the corporation beyond the value of his or her investment in the corporation. This means that, generally, creditors of an incorporated business or persons bringing legal claims against the business cannot go after the shareholders personally, nor after their personal assets. By contrast, where a business is unincorporated, owners assume personal liability in relation to the business and their personal assets are at risk of being seized to satisfy debts, obligations or claims relating to the business.

Another implication of a corporation being a separate legal entity from its shareholders is that the corporation, and therefore the business, continues to exist despite changes in the shareholders. It is the corporation, not the shareholders, that owns the assets of the business, thus the business remains intact despite changes in ownership of the corporation. This feature can simplify the sale of a business and facilitate succession planning within family businesses.

Finally, incorporation may provide business owners with opportunities to decrease or defer taxes.

We encourage you to contact us to discuss whether incorporation is right for your business.