Is Corporation Right For My Business?
ฝัง
- เผยแพร่เมื่อ 15 ก.ย. 2024
- Separate legal entity provides many benefits, but comes at certain costs. Not everyone needs a corporation, and not everyone is ready to manage it. In addition to the higher registration costs, Corporation imposes many administrative responsibilities on its incorporators. In addition, by creating a separate legal entity, and a new tax-payer, Incorporation results in additional tax returns and higher costs of preparation than Sole Proprietorship.
Despite certain drawbacks, operating under an incorporated entity provides business owners with significant benefits. It also opens more opportunities and possibilities for the future business growth and development. In addition, it shields the business owners from many legal and administrative liabilities.
In this video, we overview the benefits and the costs of a corporation and will discuss to which types of businesses, or business ideas it provides the best solution. We will provide a list of considerations for entrepreneurs that should support their decision to incorporate their business and operate as a separate legal entity.
Our website - cbes.ca/
Facebook - / canadianbiz
LinkedIn - / cbes
All information provided in this video is for informational and reference purpose only. Nothing contained herein shall be considered as a legal advice or instructions to be acted upon. CBES - Canadian Business and Enterprise Services does not offer legal advice online or on its TH-cam channel. Please consult a professional before you act in reliance on the information contained in our videos.
These videos are gems. Hard to find videos on Canadian business laws. In addition to the videos the questions and you taking the time to answer is a gold mind.
Same none ironed shirt with a blazer!
Thank you! These are so helpful!
hi there, thanks for the videos, from my understanding if I wanna start a staffing agency it's better to have a corporation then. please include your business infos in the videos if you want to be reached. keep up the good work.
JMichael, it is correct. I strongly suggest to incorporate before you start staffing agency. Thank you for your advice, I will implement it for my future videos.
Great video. Ty
very interesting and informative video, thanks!
Thank you for your great advise
Separate legal entity provides many benefits, but comes at certain costs. Not everyone needs a corporation, and not everyone is ready to manage it. In addition to the higher registration costs, Corporation imposes many administrative responsibilities on its incorporators. In addition, by creating a separate legal entity, and a new tax-payer, Incorporation results in additional tax returns and higher costs of preparation than Sole Proprietorship.
Despite certain drawbacks, operating under an incorporated entity provides business owners with significant benefits. It also opens more opportunities and possibilities for the future business growth and development. In addition, it shields the business owners from many legal and administrative liabilities.
In this video, we overview the benefits and the costs of a corporation and will discuss to which types of businesses, or business ideas it provides the best solution. We will provide a list of considerations for entrepreneurs that should support their decision to incorporate their business and operate as a separate legal entity.
Very knowledgeable. I’m in cleaning business right now i have sole proprietor and trying to incorporate the business.when is the right time to do it and the benefits of it… thank you
I would suggest incorporating in one of the following situations:
1. you reach 50K profits per year.
2. You plan to grow and hire additoinal workers
3. you plan to grow and work with partners.
I setup a corporation a couple years ago through a company suggested by a training I took I do affiliate marketing but I am still learning I stopped buying traffic because I want to learn the skills first the cost of the fees you said where a lot! If I am still learning should I let the corporation dissolve and only set it up once I am fully functioning as a business not before. If I don't know what I am doing I should not be in business because it is a waste of time and money.
Well, if you already incorporated, then keeping a non-operating corporation does not cost much. You can file $0 tax return through online filing with the CRA and that is it.
From other side, should you decide to operate your business in the future - it will be a couple of years old by then, hence increasing its reputation and reliability.
If you want to grow, develop something of your own and have the chance of making actual money - the only way is through a business. I know many people that make $$$$ and still have no idea what they are doing and how their corporations work.
Bottom line - this is a question that you should decide for yourself based on your personal preferences...
Hey man, respect for responding to so many comments, If im starting a business creating backyard playground structures that I plan to keep small, would it be ok to stay as a sole proprietor and just buy insurance? Thanks!
Gabe, while SP and insurance is an option, the proposed type of operations implies high liabilities and future risks (children injuring themselves). So, I personally would incorporate and keep insurance as well - just to get some peace of mind. Alternatively, you can start as a SP, just to save the initial costs, operate for 3-6 months see how the business is growing and then incorporate.
@@businessincanada-doitright1822 Wouldn't "upgrading " to a corporation cause some serious hassle when doing your taxes? Having you be your own business then it swapping half way through the years seems like a nightmare. Also, If I do just go with a corporation what's the point of buying insurance if they can only sue the corporation? Thanks for the help man
@@gabrielness4306 Gabe, I think that your presentation is a bit oversimplified. It is a hassle to transition a business from SP to corporation, but for many beginning entrepreneurs would rather save the initial costs and then hassle when they have proven that the business makes sense.
You also do not have to do it "mid-year", you can make the transition on Jan 1, and this will further reduce the hassle.
Same goes to insurance - first of all always remember that there are things that you are still liable for as a director of the corporation (watch my video on topic), second as your corporation grows and accumulates assets, you would like to protect those assets from future claims - this is another reason for insurance.
I have my business incorporated and am wondering if it is possible or how I would have multiple businesses under this one as a parent company. Like different sectors serving a different purpose under with the parent company name included in them all eg. FENTY beauty Fenty skin Fenty fashion etc
Simi, if all your products are being sold under essentially the same name, like Fenty, then look at each type of products as a separate department within one organization.
When you want to use different names for separate business operations, let's say cleaning service under name A and IT service under name B, you still can do it under "one roof" but should register the names through a master business license.
Hello, I’m about to start a vending machine business for snacks and drinks with 1 to 3 machines. Kindly advice which of the two business form sole proprietor or incorporating would be a good way to register the business?
Hi, thanks so much for these extremely informative videos! I've been reading some of the comments and your replies but have a unique situation I want to ask about. I want to invest in real estate (buy and sell property, also renting) and finance with some other assets like stocks, etc. What is the best route to take for incorporation or sole proprietorship considering both residual and sales income? Are the special considerations or steps for when setting up the business? Thank you!
Hello your videos are very insightful. I'm currently a tattoo artist and I'm supposed to be a sub contractor under the business I work for, I haven't registered anything as of yet but soon plan to go independent and I feel that a SP would work with tattooing. My question is though, if I decide to open an SP business to tattoo along with an online store for selling art and clothes would that still work under a SP business or would I have to transition of a Corporation? Thank you.
Drea, this will work under a SP form of business. That being said, with the relatively high level of liabilities (risk of inflammation, paint poisoning, allergy reactions and more), which might result in high law suits and costs, I do not see a reason why not to incorporate... The process is not costly and the costs of maintenance will not be too high, so as a mitigation of risks I think it is a good price to pay.
But if you still decide to go as a SP, you can do multiple businesses under one SP umbrella.
very helpful video, I am in the same situation I want to start my business as HVAC contractor only me working initially want to go as part time but the risk involves in this type of work like if my work damages the customers property
please suggest me which should i select sole or corp initially my business income will be very less
Hi, with this situation of a high risk and low income it's hard to advise which way to chose for the following reasons:
a. from one side, operating as SP and having an insurance might seem as a cheaper option, but insurance will still cost $2k +...
b. alternatively, incorporating will not negate the need in insurance, so it will add the costs of incorporation and maintenance (see my separate video about the costs) to the costs of insurance.
Bottom line, I would personally start as a SP with insurance and once I reach $50K sales per year would transition to a corporation.
@@businessincanada-doitright1822 hi, thank you for your videos, I am in the same situation. I want to start my own plumbing business in edmonton alberta, but am not sure which option is the best to start. I don't want the risk of being a SP but I would obviously get insurance, would they only go after your personal assets if the insurance doesn't cover the damage? or could they still sue you if insurance covers the damage?
Also if I am a SP and end up wanting to incorporate, then could I move my company name over from a SP to corporation, or would i have to get a whole new name?
I would like to incorporate, but maybe its not worth the hassel and money to start. what are your thoughts?
@@uaintplumbinguaintnothing4692
Hi, there are two separate questions and I'll try to answer both.
From the insurance perspective, what every business owner should keep in mind is that it is you who is being sued, not an insurance company. They only cover the damages to the maximum limit of the coverage. In case the lawsuit will result in a higher award, the entrepreneur will be personally liable for the balance above the coverage limit.
That being said - you should always keep at least the minimum insurance for your business.
The second question is a transition from an SP to a corporation - it is possible, but requires a proper preparation and understanding of the nature of the process. You can transfer the name from an SP to the corporation and can continue the business in an identical way with your SP.
Bottom line, in case you plan to start a not-too-risky business and want to see how it works before putting resources into an incorporation - this is possible.
Thanks for thegreat vedios that you make, I have a question, is it a good idea for a real estate agent to create a corporation ? If yes, what is the best way to get paid, salary and get a T4 at the end of the year or dividends and get a T4A, your answer is appreciated
Abe, in most of the cases, it is a good idea for the REA to have a personal corporation. How you pay yourself will depend on many variables, and you will have to review the situation every year with your accountant.
Would someone ever corporate their business if they are running just an inventory based home business selling on ebay, etsy, amazon or poshmark? And when would you ever switch from sole propietor to corporate when selling on any of these platforms?
Salute, you definitely should always consider incorporation, especially when running your business from home - in case something happens and the business is being sued - your (and your children's') home will be used to cover the losses.
Every sole proprietor shall consider incorporating for three reasons (not necessarily in conjunction):
1. the risk exposure from your products - child care, food, electronics etc- all these might result in serious damages, injuries and even death. If you deal with these - you might want to incorporate from the very outset.
2. tax planning - as a SP your business income is taxed at a personal level, meaning - progressive tax rates. Once your income reaches $50K, operating a business through a corporation will allow you better tax planning and deferral opportunities than a SP.
3. Growth - if you plan to grow your business, work with partners and investors (even in a distant future), corporation is the only way to go.
Awesome videos! All the information is great. I have a question:
If I have a corporation and a different operating name. Do I make my invoices under the corporation or under the operating name.
Thanks in advance
Eric, in case your business name is properly registered (master business license in Ontario), then you can issue and invoice under either one.
@@businessincanada-doitright1822 awesome! Thanks for the information. Keep up the good work
We want to register our Import Export company in Canada. Which type company is good. Kindly make video
Overall, as an opposite from many other jurisdictions, there is only one type of a corporate legal entity - a regular corporation. LLC etc do not exist in Canada.
Import/export business is best done through a federal corporation.
Hello, I have watched several of your videos and they have been super helpful. I am planning on starting a business as a cake/pastry/desert artisan. I would assume incorporation would be the way to go considering potential future growth. But there are several types of incorporation such as INC, LLC. I am not certain what the best option for me is. I will be running this entity alone to start. Can you recommend which is the best option for this type of business? Thank you for your inspiring videos!
Lorraine, I think you are right, with the pland of future growth and the risks arising from selling food, the corporation is probably the most preferential way to move forward.
When incorporating a business, you have various options for the ending - Ltd., Inc., Corp. etc. all these make absolutely no difference and I usually suggest to use the one the sounds better for you personally.
LLC on the other hand does not exist in Canada, it is being used in the US and many people think that the same type exists here.
So in your case, use one of the endings for the Canadian corporations.
@@businessincanada-doitright1822 Thank you very much. I appreciate your fast response to my question. Your videos have helped me so much.
i have incorporated an E-Commerce company , please visit deliveryguys.com.pk for Free Add of your product and for delivery of your products and services in your area. please send details at amrasaawan@yahoo.com
Hello, your information has been very helpful, can you answer me couple questions: if i am the only owner and I will be the only person running the business, can a do a Corporation? I want to start a cleaning company as a part time job, I am in between a Sole proprietorship or Company. If a decide to to it as a sole proprietorship, can I change it to a Company if my business grow?
thanks!
Hi Monica,
If you operate your business alone (no employees) and do it as a part time, I think that incorporation might be a bit of an overkill for you. Once your business grow, you can always incorporate and transfer your operations to the corporation.
As the video explains in your case the important questions are of liabilities and taxes. If you are working alone and your earning from this part time business are less than $50,000 a year - you might choose to stay sole proprietor at this stage.
Business in Canada - Do it Right! I needed to confirm that :) thanks a lot !
I am also in this boat. I want to start selling toys on Amazon Canada, using retail arbitration on a part time basis. Probably aiming to make about 30,000 a year. It will just be me. But Im worried if something goes wrong and someone sues. It will be name brand items that I sell. But wasn’t sure if my own personal liability insurance covers if anything happens to someone. Or if I should incorporate so that I don’t have the liability. Which way would you advise to go? Thank you very much for your consideration.
I have a challenge: I'm a Canadian living abroad wanting to do business completely online but I can't incorporate my business in Canada since I don't have a physical address. I would like to earn money online so I can buy or at least rent something which could serve as the physical address for this business but at this point that isn't an option for me. Any advice?
Recent pharmacy graduate here. I have been working as a relief pharmacist (part time) under sole proprietorship. My yearly income under this setup would be under 60k. I purchase liability insurance as a requirement for me to practice. Does this insurance protect me from liabilities and if not, or not fully, would you recommend incorporating? Second question, I also work as an employee, would income tax be calculated from the combined income (sole proprietorship + employee) or each income would get taxed separately at whatever income bracket it ends up at the end of the year. Sorry, I know this is a long question. Your help is greatly appreciated.
Visar, the income would definitely be taxed as a single income as long as you operate as a SP. So with your salary being paid, every dollar you will make from your private business will be taxed at the highest tax bracket you are at. When incorporating, then you will have two separate taxpayers - you personally and your corporation, and then you income will be split between these taxpayers and will be taxed separately.
from the liabilities perspective - first of all, a liability insurance is a MUST in your case. Also, it will cover most of your exposures. And finally, as a pharmacist, your corporation would most probably be considered as a professional corporation - a special type of corporations used by licensed individuals, in which case the liabilities remain personal and corporation will not protect you in any way in a case of negligence, but still will be better in other situations.
But, financial liabilities of a business - let's say unpaid debts, loans, credits, etc. - all these will stay with the corporation in most cases.
Dumb question: If I have a corporation for say lawnmowing. Can I then also do other businesses such as real estate under the same corporation or do i need to register as a separate business?
Not a dumb at all!!!
When incorporating a busienss we have an option to limit business operations to certain scope of operations, BUT - most companies do not have this limitation, which means that any type/s of business could be operated under one roof. Check your articles of incorporation, and in case nothing is written there - you can operate as many businesses under one corporation as you wish.
Are there certain industries where it only makes sense to operate as a corporation? I am thinking of starting an e-commerce business selling baby and kids goods. I would only be reselling established brands, not manufacturing things myself. Would a sole proprietorship be sufficient in this case, or would there still be high risk that would be mitigated by incorporating? Where does business insurance come into play? Thank you in advance!
Hi Mackenzie, I would say that any business with increased liabilities, risks of injuries and accidents justifies an incorporation. What you describe as your proposed business operations is a borderline - although you would be selling brand-name products, you are still at risk of being sued along with those "established brands". Moreover, them being established brands, will definitely result in significantly higher claims...
Please also keep in mind other considerations such as tax planning (beyond 50K annual profits it definitely makes sense to incorporate), and future expansion and working with partners - also justifies incorporation.
Insurance is definitely important in mitigating the risks, but will not assist with the other considerations. Additionally, insurance has its limits, and once the claim exceeds the insurance coverage - you again will be at risk of personal losses if operating as a sole proprietor. And also remember - insurers are your best friends when it comes to the payment of premiums and significantly less so when it comes to covering your losses....
So, unless what you plan to do will be a very small kind of operations, I would suggest at least to consider incorporating your business.
@@businessincanada-doitright1822 thank you so much for the reply and for all the insight you share! Such a helpful starting point for me.
Really like your videos, Keep it up!
Want to start my own plumbing company, for the forseable future it would just be myself no employees.
Legally, inc. Seems to be the logical route.
But, if i where to be sole proprietor, would i be able to write off the same expenses, like my home bills ( it would be my buiss address )equiptment, round of golf, dinners etc ?
KWS, the answer is generally "yes", but! :-)
First of all, your expenses should be related to your business. The question is "whether you spent the expense to reasonably generate the income". In this case, trying to recognize golf as a business expense for a plumbing business might be not too prudent.
With regards to the type of business, until you get to 50K of income (profit), corporation might not be the ideal solution, but beyond this point, you should consider it for sure.
Also keep in mind the liabilities - if your plumbing work results in my house being flooded and my $15K persian carpet destroyed (I don;t really have one), then you will be sued personally...
If you have a rental property and a daily trader for stocks. can they both be in the same corporation or does it has to be separate. One being in sole and other in corporation?
Kevin, both options are possible and have their benefits. That being said, you should consult your accountant first - both types of operations that you've mentioned have their own special taxation rules, so you should first review how their combination will affect the taxation of the corporation.
Good luck
How many people at least should be in a corporated company?
One ;-)
@@businessincanada-doitright1822 Thank you!
non-resident canada can register Corporation Business?