There are often both accounting and legal considerations in deciding whether it makes sense to incorporate a company to run a business through rather than carrying on business as a sole proprietorship. On the accounting side, one reason to consider incorporating is the ability to split income between family members by having them as shareholders in the company and therefore being able to receive dividends.
On the legal side, incorporating can help shield you from personal liability. There are only a few situations where liability of the company can be passed along to a director or officer of a company including cases where a director or officer has signed onto a contract or guarantee in their personal capacity as well as on behalf of the company. Directors also take on some limited liability for other matters such as unpaid wages or unremitted source deductions as well as the requirement to comply with certain obligations such as acting in the best interest of the company and performing their duties with a certain level of care, diligence and skill.
You should speak with both your lawyer and accountant in determining whether incorporating makes the most business sense for you.
This information is general in nature only. You should consult a lawyer before acting on any of this information. This information should not be considered as legal advice. To learn more about your legal needs, please contact our office at (250)448-2637
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