The pros and cons of incorporating
Select a business structure that’s best suited to your new enterprise.
Planning and starting a new business is an exciting time, so you’re likely feeling full of energy and enthusiasm as you transform your idea into reality. You’re ready to share your offering with the world – almost.
One decision you’ll need to make is to select a business structure that’s best suited to your new enterprise.
In Canada there are four basic types of business structures:
Whether you choose to be a sole proprietor, create a partnership, form a corporation or organize a co-operative, take the time to understand the pros and cons of each structure before settling on the one that’s best for your business.
Many businesses eventually become a corporation although they begin as sole proprietorships or partnerships. By forming a corporation you can gain more credibility, enjoy limited personal liability as a shareholder and receive possible tax benefits.
A corporation is a more complex business structure but also carries numerous benefits. In Canada, incorporation can be done at the federal level or the provincial/territorial level. Consider seeking legal advice before incorporating so you fully understand your responsibilities.
Some advantages of establishing a corporation include:
Certain disadvantages of choosing a corporation for your business structure include:
To learn more about forming a corporation, review this helpful information on the Canada Business Network website.
Remember that you can change the structure of your business throughout its lifetime. You might decide to restructure as your business grows and expand depending on the changing needs of your operation. For example, after a few years of operating as a general partnership, you may want to raise capital from investors and decide to incorporate.