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Learning Centre: Corporation
What is a Corporation?
A corporation involves a more costly and complex setup but has many benefits including the fact that your corporation is a separate legal entity from you and other owners involved. One of the key benefits is that owners (stakeholders) have limited liabilities.
In general, there are many advantages to moving to an incorporated business, and if your small business is growing quickly or your new business is already large enough to warrant it, going with an incorporated business model will be beneficial on many levels and is worth the extra processes and related expenses.
PROS OF CORPORATIONS
PRO #1
Corporation exists as a separate legal entity.
PRO #4
Profits are earned by the corporation with dividends, salaries paid to Directors and shareholders or held by the corporation.
PRO #2
Owners (shareholders) enjoy limited liability, offering protection and separation in the event that the business falls on hard times.
PRO #5
Directors and shareholders may draw a salary, only paying personal income taxes on that salary while the corporation pays only corporate income tax based on profits.
PRO #3
Full control by Directors and shareholders.
PRO #6
Assets are owned by the corporation with no specific claim to assets by Directors or shareholders.
CONS OF CORPORATIONS
CON #1
Most likely, the services of a good bookkeeper to maintain monthly accounting records combined with a corporate Accountant who will verify bookkeeping, make adjustments, and file your corporations tax returns will be required. This comes with some additional fees than most smaller businesses will deal with.
CON #4
Requires an Annual Return be filled which updates details such as listed Directors, contact information etc. This requires a small fee each year.
CON #2
Setup of a corporation does involve a more involved process, slightly longer set up time, and is slightly more expensive than other business registrations.
CON #3
There are more regulations and organizational tasks involved in maintaining a corporation.