Why Incorporate Your Business?
Limited liability and personal asset protection:
Incorporating is the creation of a separate legal entity and allows owners to separate and protect their personal assets from business creditors
Tax planning/flexibility: Accountants will recommend incorporation to obtain tax advantages once revenues reach a certain point. Profits may also be retained in the business with less tax consequences than would apply to a sole proprietorship/partnership. Long term, as the corporation grows, serveral tax planning options are available which are financially more efficient than the options available to sole proprietorships.
Perpetual existence: Corporations continue to exist even if ownership or management changes. Sole proprietorships just cease trading if an owner dies or becomes sick.
Additional credibility: After incorporating you have “Inc.” or “Ltd.” after your buisness name. This can add instant authority form a marketing view point. Consumers and vendors may prefer to do business with an incorporated business rather than a sole proprietorship because of the perception (and in most cases, reality) that a coporation is not dependant solely upon the existence, health and performance of one person. It creates a certain ‘comfort’ level especially in terms of warranty.
Raising capital:In an incorporated organization, capital for operation and expansion can be raised not only by borrowing but also by issue of share capital through the sale of shares.
Name protection: In Alberta, other businesses may not use your registered corporate name.
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