Should I Incorporate My Edmonton Small Business?
Posted On: 01/05/16 - 0
By Daniela Hops, CMA,
Here are a few reasons why you may want to incorporate your company:
- Trying to get financing. It shows the lender you are serious.
- To protect your personal assets due to limited liability of a corporation.
- Your vendors want to only deal with corporations and require you to do so.
- The Lifetime Capital Gains exemption of $750,000 when the shares of the corporation are sold.
- You want your family to have ownership in your business and want to control as to how much each member has.
- To take advantage of the small business deduction.
All of these reasons are valid and should be considered when making the decision to incorporate your business. It doesn’t matter if you operated as a sole proprietor for a while and built a sizeable business, whether you purchased a business, or if you are starting a business.
Too often business owners take the advice of a friend and go directly to Alberta Registries to incorporate. Be aware Alberta Registries does not give advice. Decisions have to be made as to how to distribute the shares to the shareholders, the importance of keeping a minute book, how to choose your year-end, or the ongoing obligations of a corporation. Most likely you will be the majority shareholder or only shareholder in the corporation as well as one of the employees. Getting proper advice from a professional may cost a little up front, however can save you a lot of money when you have a successful, profitable corporation.
There are certain obligations and restrictions a corporation has which shouldn’t be taken lightly:
- Invoices need to be recorded as earned regardless if they are paid or not;
- A separate bank account has to be set up in the corporate name;
A new business number (GST, corporate taxes and Payroll) has to be set up with CRA (Canada Revenue Agency);
- A year-end date should be chosen and CRA needs to be notified;
- T4 and/or T5 slips have to be filed for personal withdrawals made during the year;
- GST has to be filed on time, otherwise penalties and interest will occur;
The corporate tax filing is 6 month after the chosen year-end, however the corporate tax payment is due after three month, so don’t wait too long before seeing your accountant.