Incorporation
Need advice?
The following lawyers focus on
Incorporation:
Michael J. Velletta
Natalia M. Velletta
Sankar Nair
If you are an entrepreneur or businessperson creating a new business, or desiring to take an existing business to the next level, establishing a corporation may be the ideal option for you.
A corporation provides a business and its owners with numerous benefits, including protection of personal assets, increased credibility with customers, clients, and investors, and potential substantial tax advantages. This includes minimizing capital gain tax exposure. To achieve these benefits, a corporation must be carefully created and implemented.
Our skilled team of experienced legal professionals will work closely with you throughout the incorporation process to ensure it is effectively crafted and smoothly rolled out. We analyze your needs and guide you through the process to achieve the most beneficial result that achieves your goals and objectives.
Our office will prepare the necessary documents and make sure they are correctly filed with the registrar of companies. Your company records will be expertly created and available to shareholders, lenders, and accountants. We have too often seen corporations that were poorly conceived and executed by others that do not achieve desired results – an opportunity and money wasted.
Starting or transitioning a business to a corporation often comes at a time when the business is facing other financial demands. For this reason, we purposely keep our fees low to support your business development. In fact, our fee for acting as your registered and records office for the first year is waived.
Following the creation of your corporation Velletta Pedersen Christie is well-positioned to provide a full array of legal services to a diverse array of businesses, industries, and endeavours. We pride ourselves on the provision of exceptional service and remain committed to accessibility and responsiveness to client needs. Deploying efficient business practices reduces fees and helps us maintain the highest levels of professional excellence. We look forward to being of service to you.
Frequently Asked Questions about Incorporations
No! However, our lawyers can help you incorporate correctly to prevent costly mistakes in your Articles, Bylaws, Registers, and Share Structures. Such mistakes often cost more to fix than if the company was incorporated correctly from the start.
Federal incorporation provides business name protection across Canada, while provincial incorporation restricts business name protection to one province. Federal corporations may need extra-provincial registrations to operate outside the home province. The choice also depends on where you plan to operate, your growth plans, residency of directors, type of business, and yearly maintenance budget. Our corporate lawyers at Velletta Pedersen Christie can help you determine the best jurisdiction for your business.
Under the Business Corporations Act or Canada Business Corporation Act offering a flexible array of ownership, control and profit participation share structures. A corporation’s articles offer a statutory scheme with corporately established rules and governance. Shares can be common or preferred, with different rights and restrictions. From our experience, the most common mistakes performed by DIY incorporators are contained in the Share Structure and Articles/Bylaws of Incorporation. Proper structuring ensures flexibility for future investors, co-founders, or employees. Our corporate lawyers at Velletta Pedersen Christie provide guidance prior to incorporation to ensure your new corporation has a share structure that is flexible and poised for growth.
Income Splitting: Since a corporation allows for flexible ownership options and provided certain employment provisions are met, a corporation provides excellent opportunities to split income with your spouse, especially after you turn 65. Income splitting through dividends can result in substantial tax savings not available with other business structures. Prior to incorporating, it is important to seek advise from a Chartered Professional Accountant to determine if you and your spouse qualify for tax savings by splitting income.
Limited Liability: When properly implemented, a corporate structure generally shields your personal assets from the debts and liabilities your business is exposed to. This can be an inexpensive form of “insurance”. Other business structures, such as proprietorships and partnerships, do not have limited liability. It is important to remember that incorporation limits personal liability for business debts, but directors and officers remain responsible for legal obligations, including taxes, employee wages, environmental regulations, and fiduciary duties.
Financing: If your business seeks investment capital from outside investors, incorporating may be the best option for you. Various share classes can be developed to attract investors with fixed dividends, preferred shares, convertible shares, or fully participating equity shares. Some investors are attracted to the lower rate of taxes associated with earning dividends from corporate shares. For those seeking large amounts of capital, corporations often “go public” to seek capital from wealthy or accredited investors, institutional investors or from the general public through an “Initial Public Offering” or IPO.
One general benefit of a corporation is taxation at a lower rate. A corporation pays its own taxes, typically at a lower rate than an equivalent amount of personal income. This is especially advantageous if you leave money in the corporation, as you obtain added financial leverage from the money that would have been given to CRA, had you not incorporated. As a shareholder you can take money out of the corporation for your personal use by wages, bonuses or by tax effective dividends. When you go to sell your corporation, in most cases, you can take advantage of a Lifetime Capital Gains Exemption topping $1.25M!
The main disadvantage of incorporating is the cost, although, it is not expensive to incorporate. At Velletta Pedersen Christie, total fees including all out-of-pocket expenses and taxes are often less than $1,600. Yearly maintenance costs for a BC or federal corporation including all taxes and out-of-pocket expenses typically costs under $400. Still, if your business is very small and not likely to grow, or you do not see yourself taking advantage of the tax strategies available to corporations, these expense can simply be avoided by continuing to do business as a proprietor in your own name or in a partnership.