Formation of Incorporations

  • LLC
    • A limited liability company (LLC) is a business structure in the United States whereby the owners are not personally liable for the company's debts or liabilities. Limited liability companies are hybrid entities that combine the characteristics of a corporation with those of a partnership or sole proprietorship.
  • C CORP
    • A C corporation (or C-corp) is a legal structure for a corporation in which the owners, or shareholders, are taxed separately from the entity. ... The taxing of profits from the business is at both corporate and personal levels, creating a double taxation situation.
  • S CORP
    • S corporations are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. This allows S corporations to avoid double taxation on corporate income. S corporations are responsible for tax on certain built-in gains and passive income at the entity level.
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What are the Advantages & Disadvantages of Incorporation

Advantages: Separate Legal Entity/ Limited Liability:

Your corporation is a separate legal entity and as such, creditors or legal actions are against the corporation and its assets, not your personal assets. The shareholders of a corporation have limited liability. Please note shareholders can be legally liable for the corporation's GST/HST and payroll taxes.

Tax Advantages:

If you don't need all the corporation earnings for personal income, you can leave them in the corporation, deferring personal taxes on withdrawals and possibly enjoying a 15.0% preferred tax rate on the first $500,000 of profit in a CCPC.

Your corporation has tax flexibility from which you may personally benefit. If you sell shares in your Canadian-controlled private corporation (CCPC) capital gains will be tax – free up to $813,600.

Disadvantages:

The administration costs are more expensive with a corporation than with a partnership or a sole proprietorship. Administration costs include incorporation costs, annual financial statements, and annual corporate income tax return.

Losses in an incorporated business can't be personally claimed. 

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