Langley and Surrey Incorporation Lawyers
A common decision faced by many business owners at some point, is whether or not to incorporate. The lawyers at Taylor & Taylor Law regularly advise clients in Langley, Surrey and the BC Lower Mainland regarding the incorporation process, and compliance with the governing legislation.
What is a corporation?
A corporation is a separate legal person distinct from its shareholders. Corporations have all the rights, powers and privileges of an individual meaning they can sue and be sued, file taxes, own property, sign contracts and enter binding legal obligations.
What is a professional corporation?
A professional corporation is a private company that is governed by a self-regulating governing body as well as provincial legislation. The governing body often restricts what name the company can have, what the company can do, and who can own shares in the company.
Only certain professionals in British Columbia are permitted to practice through a corporation. Some examples of professionals that can incorporate their practices (to name a few) include:
- Dentists, Denturists and Dental Hygienists
- Massage Therapists
- Physical Therapists
- Chartered Professional Accountants
Each self-regulated profession has its own rules governing professional corporations. If you are wondering whether your profession can incorporate, or are considering operating as an incorporated professional, contact us to speak to an incorporation lawyer.
What are some advantages to incorporating?
1. Corporations are immortal
Corporations are immortal—they live for as long as their shareholders are willing to keep them alive. Thus, corporations have much longer to grow and prosper than other business structures.
2. Ability to raise money
Commonly, corporations raise money by issuing shares to investors in return for consideration like money or loans. These transactions (called private placements) are regulated under the authority of local securities regulators. As well, corporations may borrow money or grant security to creditors.
Read our article on raising money through crowdfunding.
3. Limited liability
As a result of a corporation’s separate legal personality, shareholders enjoy limited liability with respect to the corporation’s business activities. Generally, shareholders are only liable up to the amount they paid for their shares. Of course, there are exceptions to the general rule.
4. Tax advantages
In Canada, private corporations controlled by Canadian residents (called Canadian Controlled Private Corporations, or CCPCs) receive preferential tax treatment. CCPCs are eligible for the small business deduction, which provides a reduced tax rate on qualifying active business income up to the federal business limit (currently $500,000). As well, most provinces offer a reduced corporate income tax rate for CCPCs who qualify for the federal deduction. Corporations also provide flexibility in deferring taxes and allowing splitting of corporate income.
Because the tax rules are complex and constantly changing, it is vital to speak with a tax accountant before making the decision to incorporate.
Read more about some of the advantages to incorporation here.
Are there additional requirements if I incorporate?
There are a number of additional requirements to fulfill after you incorporate. For example, having a corporation means that you will need to file a personal and a corporate tax return each year. Also, you will need to maintain your corporate records in accordance with the applicable business corporations statute, which includes preparing the appropriate resolutions and paperwork, and filing the annual report each year. If you are unsure about the additional requirements that come with incorporation, or are unsure about annual reporting requirements, contact us to arrange a consultation with a lawyer.
Should I incorporate?
There are a number of business structures in addition to a corporation, such as sole proprietorship, partnership, limited partnership, limited liability partnership (LLP), and unlimited liability company. Depending on your financial, tax, personal and legal circumstances, incorporation may or may not be the appropriate vehicle for your business.
The decision to incorporate should only be made after consulting with an accountant and a lawyer. These professionals will ensure you understand the legal and tax implications as they apply to your circumstances. They can also help to ensure that you properly set up your corporation at the outset, thus eliminating the need for costly amendments to corporate structure down the road.
Contact us to schedule a consultation with an incorporation lawyer.