A corporation can do anything an individual can do, like opening a bank account, entering into contracts, owning property and assets, and taking out loans.
Here are some of the reasons why you should incorporate your business:
Limited Liability
Compared to a “sole proprietorship”, where the business and its owner are one and the same, a corporation is a separate legal entity from its owners (known as “shareholders”). Shareholders are not usually liable for the corporation’s debts and a shareholder’s personal assets generally cannot be seized to settle claims against the corporation.
Enhanced “Street Cred”
Incorporating your business helps bolster your credibility with customers, suppliers and financiers. An incorporated business indicates a level of seriousness that helps others feel more comfortable working with you.
Better Access to Investors
As a shareholder, you can sell or transfer ownership of your incorporated business by simply transferring your shares. It is therefore often easier to bring on investors and grow the business when you are incorporated, and to sell your business should the opportunity arise.
Better Tax Rates
Corporate income tax rates are usually lower than personal income tax rates. An incorporated business may be able to pay less tax and keep more money in its pocket to grow. If you meet the requirements, you may also be able to take advantage of what’s known as the “lifetime capital gains exemption” and pay significantly reduced taxes on the proceeds of the sale of the business.
When Should I Incorporate?
There’s no single moment when you must incorporate, but here are some common signs that the time is right:
- You're making more than you need for basic personal expenses.
- You want to protect your personal assets from business liabilities.
- You plan to hire employees, lease space, or enter into contracts.
- You're thinking about long-term growth, succession, or investment.
- You're ready to build a formal, enduring business.
Key Take-Aways
Whether you are currently operating as a sole proprietor, or just thinking about starting a new venture, incorporating a company for your business can offer many advantages.
SkyLaunch can help you incorporate your business quickly and efficiently. With our complete compliance package, we can also help you maintain the corporation after incorporation. But just like a human, a corporation must also file its own tax returns; you should speak with an accountant to help you with that.
To find out more about what you need to incorporate your business, click here.
