Have you thought about the ADVANTAGES of incorporating your SOLE PROPRIETORSHIP?  


This is the MOST frequent question I get and there is benefits and disadvantages for both structures, but we will focus on the main items that might make you want to consider incorporating your business: 

1.Limited Liability 

The main advantage of incorporating is the limited liability of the incorporated company. Unlike the sole proprietorship, where the business owner assumes all the liability of the company, when a business becomes incorporated, an individual shareholder's liability is limited to the amount he or she has invested in the company. 
If you're a sole proprietor, your personal assets, such as your house and car can be seized to pay the debts of your business; as a shareholder in a corporation, you can't be held responsible for the debts of the corporation unless you've given a personal guarantee. 

2. Tax Deferral 
Becoming incorporated gives you tax deferral potential if you are a higher income earner. Business tax rates are much lower than personal tax rates, so if your individual marginal tax rate is high and you don't need the funds for personal use you can elect to leave money in the business and take it out at a later date when your personal tax rate is lower. 

3. Selling Shares on a Tax-Free Basis 
Unlike a sole proprietorship, owners that own shares of a corporation are able to sell their shares of a Canadian Controlled Private Corporation(if certain criteria are met) for up to almost $850,000 on a tax-free basis.  This opportunity is unfortunately not available to sole proprietors and partnerships. 

There are additional items that can further entice you to incorporate, but there is also drawback such as increased accounting costs, more detailed reporting/bookkeeping, costs of incorporation. 

Interested in learning more? Talk to a GRAM accountant to see what the best fit for your particular business is.


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