- Partner News
- Media Releases
- Mainstream News
IBF Entrepreneur Online –
The three main forms of for-profit business associations in Canada are sole proprietorships, partnerships, and corporations. If you are unsure which form of business you are operating, and have not consulted a lawyer or an accountant, it is likely that you are operating a sole proprietorship or partnership. A common reason for incorporation is to protect oneself from liability. Unlike sole proprietorships and partnerships, a corporation is a separate legal entity and offers protection from legal actions being brought against a business owner personally. However, this protection is not as comprehensive as many believe, and a prudent business owner should purchase insurance to protect against legal claims whether or not their business has incorporated. Most often, the appropriate time to incorporate a business is when it becomes advantageous to do so from a tax perspective. Corporations are taxed separately from shareholders, and the corporate tax rate can be lower than your personal tax rate, depending on your income. It is best to consult with a lawyer and an accountant if you think it is time for your business to incorporate.
You can operate your business across Canada whether you incorporate federally or provincially. Federal incorporation is governed by the Canada Business Corporations Act (CBCA), while provincial incorporation is governed by each province’s incorporation legislation (for example: British Columbia’s Business Corporations Act).
A common misconception is that incorporating federally allows your company to operate across Canada without any further registration. In fact, a federally incorporated company will require registration in each province the company operates; and therefore, federal incorporation is usually more expensive. However, there are several benefits to incorporating under the CBCA:
Federal Government resource here.
There are several benefits to incorporating provincially:
The Bottom Line
The primary benefit of incorporating federally is a limited form of name protection across Canada, but incorporating provincially is usually easier and less expensive.
Please Note: This article provides a very broad overview of the advantages and disadvantages of incorporating federally and provincially. Determining the statute and jurisdiction in which to incorporate a business ideally involves a thorough review of the available options. Even a short consultation with a lawyer in your home province can help determine the best option for incorporating your business.
If you are in British Columbia and would like further information regarding incorporation or another business law matter, the University of Victoria Business Law Clinic provides free legal information services. Clients living in and around Victoria are interviewed in person at the University of Victoria Faculty of Law, while those living in other communities can be interviewed by telephone. For information or to book an appointment please leave a message on the BLC’s voicemail at 250-472-4522 or send an email to [email protected].
Source: Futurpreneur Canada