What is the benefit of incorporating? We are often asked what the benefits are of Inc. and there are several.
First of all, you protect your personal assets because using a corporation you have limited liability. If someone wants to file a lawsuit against the company, that will not affect your personal assets because they’re suing the company but you. The most that you would stand to lose would be the money that you’ve invested in the company.
You would achieve significant tax savings by incorporating. Right now the combined personal tax rate for a small corporation in Alberta is 11%, 9% federal and 2% provincial. If you are paying personal tax on that same income i.e. if you were not incorporated, you could easily be looking at 30 or 35% or more. So as you can see, there are significant tax savings by incorporating your business or yourself rather than being a sole proprietor or employee.
If you are working full-time for a company you need to be careful because the Canada Revenue Agency will not recognize the corporation if the corporation has only one source of income. So you need to find ways of having multiple sources of income.
If you own any property for example revenue property you want a corporation to own that property rather than owning it personally. If things don’t work out well with the revenue property, this won’t affect your personal assets.
If you have multiple revenue properties is not a good idea to have them all owned by one corporation. If something happens to one of the properties is going to adversely affect your entire portfolio. Further, there is a huge tax savings if you able to sell the shares of a small corporation rather than selling the asset itself. However if you have several properties owned by one corporation you may not want to sell the shares of the corporation because you would then be selling each of the properties. So that case you would have a separate company Only each property.
Please contact us for more information if you are interested