Running your own business and becoming your own boss is the dream for many entrepreneurs and aspiring go-getters alike. While there is certainly a freedom that comes along with owning and running your own business, it also comes with increased responsibility, increased liability and a host of important decisions that will need to be made by you.
To incorporate or not to incorporate is a decision that many business owners encounter and the choice is not always an easy one to make. Here are a few things to think about when trying to determine whether incorporation is the right step.
- Costs
Incorporating a business isn’t cheap and comes with additional costs and expenses. These costs depend on what type of incorporation you choose (i.e. either provincial or federal) and the province in which you live. For example, the costs to file, register, or do a name search may vary across the country.
In addition to the costs associated with incorporating, there are also costs associated with engaging the professional services of someone who can guide you through the incorporation process. Although it is possible to complete the process on your own, it’s a really good idea to seek professional advice in order to make sure everything is correct, above board, and that you are protected.
- Paperwork
Hate paperwork? Keep in mind that corporations have stricter regulations in comparison to sole proprietor-based businesses and, as such, also have more complex legal, paperwork and administrative tasks that are required. Again, you may need to hire someone to assist with this, which could mean adding to your current operating costs.
- Taxes
One of the primary benefits of incorporating a business (and one of the top reasons why many businesses find it useful) is the fact that incorporating provides tax flexibility in terms of how you pay yourself. For example, if you’re the boss of an incorporated business, you can pay yourself via salary, dividends, bonuses – or a combination of all of those. If you are able to leave money in your business, you may also benefit from additional personal tax breaks.
- Liability
As a corporation, you as an individual are legally separate from your company (which is not the case with a sole proprietorship). If you’re incorporated and run into legal, debt or financial issues, your personal assets are not at risk, or tied to the business (again, not the case with a sole proprietor set up). In other words, the business will be sued or go to court, not you personally.
- Your Situation Now and Later On
Finally, when choosing whether to move forward with incorporation, it’s important to evaluate your current situation and your future plans, goals and overall business outlook. If your company is rapidly expanding and you’re poised for growth, it may be time to go ahead with your incorporation plans. However, if your company is a smaller start-up and you’re not quite sure where you are headed, it may be a good idea to put the breaks on incorporation, or at least do more research.
The steps involved with incorporating a business are not always cut and dry. Seeking the advice of a legal professional can help you navigate the complexities of business structures and make the right choice according to your company’s needs. A lawyer can explain the start-up and ongoing costs and draft up the many documents such as: articles of incorporation, partnership agreements, government registrations, tax forms, licences, permits, and more.
If you decide to move forward with incorporation, or you are looking for legal advice and representation in the Bracebridge and Muskoka area, call on the experienced team at Ares Law. You’ve put all your sweat, tears, money and hard work into your business, and helping you protect it is exactly what we are here for. We’ll provide the knowledge and guidance needed to help you make an informed choice and ensure that you’re fully protected. Call us today at (705) 645-8743.
