Benefits of Incorporating your business

The largest advantage of incorporating a business is limited liability. This means that the liability of the shareholders is usually limited to the amount that they have invested in their shares in the corporation. However, many incorporated small businesses are not able to get bank loans without the personal guarantee of the shareholders, so this eliminates part of the advantage of limited liability. The personal assets of the shareholders are protected from lawsuits against the corporation. However, shareholders who are directors of the corporation can be held legally liable for some debts of the corporation (such as GST/HST and payroll taxes) in certain circumstances.

Another advantage is the income tax advantage. A company pays a much lower rate of taxes. It varies from 15% to 22%, depending on the province. This tax advantage is mainly a deferral of taxes until the profits are paid out to the shareholder. If all the profits are disbursed to the shareholder as they earned, leaving the corporation with lower or no taxable income, then those will be taxed entirely as income of the shareholder, at personal income tax rates which is higher.

Always look for professional advise from an experienced tax professional before incorporating your business.


Currently, on the disposition of qualified property, an individual may be eligible for a capital gains deduction of up to $375,000, which is ½ of the $750,000 lifetime capital gains exemption (LCGE). These properties are qualified small business corporation shares, and qualified farm and qualified fishing property.
For the 2014 and subsequent tax years, the budget proposes to increase the LCGE from $750,000 to $800,000. The budget also proposes to index the LCGE after 2014 for inflation. The new LCGE limit will apply for all individuals, even those who have previously used the LCGE.