National Life - Calgary

The biggest advantage of incorporation is that the business assets of the corporation are separate from your personal finances. As a result, your personal assets generally can be shielded from creditors of the business.

Selecting to be treated as a C Corporation may also allow you, the business owner, to be eligible to participate in certain fringe benefit programs available only to workers classified as employees of the corporation.

To maintain this legal separation you must keep corporate assets separate from personal assets, hold periodic shareholder meetings, and file reports required by various government agencies, including a separate tax return. There is a cost associated with establishing and maintaining corporate formalities, and should be considered before making any decision. You will want to consult with your legal and tax advisor regarding the impact for your business.

When doing business as a C Corporation there are certain tax implications to consider and should be reviewed with your legal and accounting team.It is possible that the Corporate tax bracket may be lower than your personal tax bracket – this may lead to some benefit opportunities. Also, remember that a distribution from the C corporation to you as a shareholder may be treated as a dividend. This is sometimes referred to as double taxation – the earnings were taxed at the corporate level then again as a dividend when received by the shareholder. Whether this results in a higher tax cost than might be available through other business entities will actually depend on the corporate tax rate and the dividend tax rate.

Before deciding to incorporate, you should seek legal and tax advice on what type of ownership best suits your business.