Today we will cover a few of the pros and cons of incorporating your business. There are three major factors to consider including: liabilities, tax savings and finally the costs of operating a corporation.
Under a sole proprietorship, you will be personally liable for everything including lawsuits. Incorporating allows you to separate your assets from that of your business and all the accompanying liabilities. That way you can only lose what you have put into the business if you are sued. The CRA however will not stop there and will hold you personally liable for your guarantees.
Corporate tax rates are currently, as of 2019, 12% for the first $500,000 and roughly 27% beyond that point. One caveat is that the money needs to stay in the company to achieve these favorable rates.
The incorporation process costs money in the form of legal fees and those of professional accountants. This includes some fees that are on an annual basis. Incorporating costs roughly 2,000 - $5,000 depending on the complexity of your organization.