We’re often asked by owners of small businesses if they should incorporate. Each situation is different; however, there are a few things to consider when making the decision.
Reasons to incorporate:
1. You can afford to leave excess cash in the business to take advantage of lower tax rates.
2. To reduce personal legal liability.
3. To have more options when selling/transitioning the business. You may also be able to use the capital gains exemption.
4. To be viewed as more credible and professional to potential customers/clients/lenders.
Reasons not to incorporate:
1. You need all excess cash for personal expenses.
2. It might not make a difference to your liability if you have made personal guarantees on business debt (e.g. to a bank).
3. The extra costs involved, such as incorporation costs, annual fees, a separate corporate tax return to file each year, and applicable legal and professional fees.
4. Not required for obtaining a business number, GST account, payroll account, or tax deductions.
The right decision about incorporating is different for every business. As a result, we highly recommend you speak with an accountant before making this decision. If you’d like our assistance, please call our office at 204-943-2441 or email us at info@heartlandcpa.com to set up a free quote consultation.
