Business Basics: Part II - The Benefits of Incorporating Your Small Business

by Gleb Malinovsky, B.A., J.D.

If you read Part I of our Business Basics series, you’ll remember we talked about the types of businesses in Alberta. Now we are going to dive into the pros and cons of incorporating your small business.

Advantages of Incorporation

Tax Breaks

• Corporate tax breaks are lower than personal
• More write-offs
• Possible small business tax deduction for qualified businesses
• Recommended to speak with an accountant to obtain tax advice

Legal Protection

• Shareholder liability is limited to the amount he or she has invested
• Offers protection of personal assets, except where a personal guarantee is given

Other Perks

• Increased credibility - having "Inc.", "Ltd." Or "Corp." implies stability and professionalism;
• Business name protection
• Increased ability to raise capital

Direct and Indirect Costs of Incorporation

Now that we have covered the pros, here are some of the things to be cautious and aware of if you are thinking of incorporating your business.

Less Individual Control

• Will need to consult with shareholders and/or the board of directors before making decisions
• Dissolution can be lengthy and requires compliance with federal and provincial mandates

Administrative costs and duties

• Start-up costs
• Annual financial statements
• Costs associated with transferring assets out of the corporation​

Do I need a lawyer to incorporate my business?

• Not required by law but recommended for the following reasons:
  • Advice as to whether to incorporate provincially or federally
  • Advice as to proper corporate structure
  • Do you need a Unanimous Shareholders Agreement?
  • Maintenance of corporate records
  • In-depth explanation of costs and restrictions

Need more information? For more information about incorporating your small business in Alberta, please feel free to contact Shelley Germann at (403) 995-1410 to arrange a consultation to discuss your unique situation and options in more detail.
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The contents of this post are for informational purposes only and are not to be considered legal advice. It is advisable that you speak with a lawyer prior to making any significant decisions.
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