When you decide to start a business, one of the first decisions that you must make concerns the legal structure under which the business will operate. There are typically three ways in which you may carry on a business: as a sole proprietorship, a partnership, or a corporation. The corporate form is one of the most common ways to operate a business.
Incorporation is the legal process whereby a newly formed business entity is legally created in order to protect the owners of a business from legal liability. The incorporation process is governed by either the federal or provincial laws under which the corporation was established. Therefore, it is fundamental to employ someone familiar with the incorporation laws and regulations of your jurisdiction and the governing body that regulates your profession. There are numbers of steps that one must take in order to incorporate their business; at Syed A. Raza Professional Corp. CPA, CGA located in Toronto and Markham, we make this process simple for you by walking you through this and providing guidance on requirements that you must be aware of to move forward.
There are several advantages to incorporating your business. Using your personal identity to get a business started can be common, but as time goes on and your business starts to grow, it is not a good long-term strategy. If your company should encounter legal problems or have liabilities such as those owed to creditors, you will be personally exposed to the debts that the business may have accrued. Incorporating can help shield your family’s personal assets from being exposed to such liabilities.
Once a company is incorporated, the business will become subject to lower corporate income tax rates. Corporations are typically subject to more favorable tax rates as compared with the individual tax rate. Lower tax rates result in more money being available to help grow the business. Furthermore, corporations often also allow for income splitting between family members which can also result in further tax savings in comparison to operating a business as a sole-proprietorship. Income splitting is done using family members such as spouses, parents and children; by utilizing family members in lower tax brackets, you may be able to bring down your families overall tax burden by income splitting using a corporation.
If you are looking to incorporate your business, contact Syed A. Raza Professional Corp. in Toronto or Markham. We look forward to guiding you through this process and putting your business on the path to success.