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Operating as a Corporation

A corporation is a business structure that is legally created to be separate entity from it’s owners (shareholders).  The separation of the business from it’s shareholders creates limited liability for the shareholders.

Here are some items to consider when operating as a corporation

  • Corporations are legally created within particular jurisdictions (federal, state/provincial, etc.)
    • Corporations are bound by the laws of the particular incorporating jurisdiction
  • Corporations are the most common form of business structure
  • Corporations are considered a legal person with continuous existence

Advantages

  • Corporations have limited liability
    • Legal claims arising can generally only be subject to all of the assets of the corporations.
  • Incorporation can allow for income-splitting with family
  • Tax rates are different than both proprietorship and partnership
  • The Corporation can retained earnings
    • Money can remain in the Corporation without being declared as personal income
  • Separate legal entity
  • Tax rates are different than both proprietorship and partnership
  • Easier to raise capital

Disadvantages

  • The most difficult and costly business structure to set up a business (incorporate)
  • Can be the slowest business structure to respond to change
  • Corporations are heavily regulated
  • Forms of double taxation can occur
  • Extensive records must be maintained and potentially submitted to regulatory agencies on a period basis
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