Incorporating My Small Business, When Is It Time?
Posted On: 01/05/16 - 0

Should I Consider Incorporating My Small Business?

By Daniela Hops, CMA,

Many business owners ask “Should I consider incorporating my small business?” This is an excellent question.  One that should be taken seriously and discussed with both a lawyer and accountant before making that all important decision.

Reasons To Consider Incorporating Your Business

Here are a few reasons (from an accountant’s perspective) on why you may want to incorporate your company.  You are trying to get financing.  It shows the lender you are serious. You want 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. You also want 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. It also doesn’t matter  whether you purchased a business, or if you are starting a business.

What About Self Incorporation For Your 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 you advice about advantages or disadvantages.  Decisions have to be made as to how to distribute the shares to the shareholders.  It’s very important to keep a minute book, an how to choose your year-end.  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, it can save you a lot of money when you have a successful, profitable corporation.

Obligations and Restrictions a Corporation Shouldn’t Take Lightly

Keep in mind that 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 the CRA. A year-end date should be chosen and the 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.

If you are still not sure whether you should incorporate your business or not, call us.  Ask for Cheryl and she will book you a no charge consultation with our business advisor.

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