Decision to Incorporate

Sukhanoop Dhillon CPA Discusses the Key Considerations to Think Through When Deciding Whether or Not to Incorporate a Business.

02 February 2024

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?