Decision to Incorporate
Sukhanoop Dhillon CPA Discusses the Key Considerations to Think Through When Deciding Whether or Not to Incorporate a Business.
Advantages of a Proprietorship
- Simple to set up and maintain
- Low cost
- Can deduct business losses against other sources of income
Disadvantages of a Proprietorship
- Unlimited liability
- Not suitable for high-income earners
- Limited name protection
- No continuity of the business
Advantages of Incorporating
- Limited liability
- Tax deferral
- Non-commercial benefits (e.g. income splitting, estate planning, etc.)
- Commercial benefits (e.g. name protection, easier to raise capital, etc.)
Disadvantages of Incorporating
- Higher costs (e.g. accounting fees)
- Cannot claim losses against other sources of income in the early years
Key Points to Consider
- What is your risk of being sued?
- What is your current income level?
- Do you need name protection?
- Do you need to raise capital?
- Do you need to access credit?