Neufeld Legal P.C. 403-400-4092 Chris@NeufeldLegal.com
BENEFITS OF INCORPORATION
There are numerous reasons for incorporating your business, nevertheless, before we look at what some of those reasons are, we should address some of the fundamental realities of incorporation. Incorporation is but a singular facet of your business' legal configuration. It cannot be viewed in a vaccuum, where a certain expectation linked to incorporation will invariably be the result in every situation. As with everything else, the benefits of incorporation are impacted by a multiplicity of external forces, which often negate the benefits associated with incorporation. As such, an anticipated benefit can be negated (often without your knowledge) by other actions and laws, such that the benefits you have read about or been advised upon may not be available to yourself. Unfortuantely, this is the reality of corporate law, and the rationale for your understanding the broader realities of the law.
Two of the primary impediments to your realizing the anticipated benefits of incorporation are the law and subsequent contractual arrangements that you enter into. Statutory law puts clear clear legal constraints on the corporation, as is evident in the Alberta Business Corporations Act (and the Canada Business Corporations Act for federal companies). Other federal and provincial statutes also impose rules and constraints on incorporated companies, as does the common law (i.e., via the principles of fraud and negligence). Meanwhile, subsequent contractual arrangements that you enter into can negate or seriously reduce the strategic benefits associated with incorporation, whether its through the requirement of personal guarantees or indemnifiers, the specific relinquishment of legal protections, or such other contractual alterations.
Nevertheless, there are potential benefits associated with incorporation, which can be extremely lucrative if properly integrated into a thriving business, including eliminating or minimizing personal liability, prospective tax advantages (i.e., tax rates and tax deferral), business perception, partnering with shareholders, structuring for investment opportunities, structuring for control, business succession planning, among others. The key, however, is that you work with skilled professionals (lawyers and accountants) such that you understand the applicability of those legal benefits, their limitations and situations that will negate or seriously reduce those benefits.
As such, when your business seeks the professional services of experienced legal counsel, whether when incorporating a new Calgary company or dealing with its ongoing corporate development, your business can look to the Calgary, Alberta law firm of Neufeld Legal P.C. Contact us at 403-400-4092 or via email Chris@NeufeldLegal.com.
Alberta Business Corporations Act
- important elements
Relationship of corporations
2(1) For the purposes of this Act,
(a) one body corporate is affiliated with another body corporate if one of them is the subsidiary of the other or both are subsidiaries of the same body corporate or each of them is controlled by the same person, and
(b) if 2 bodies corporate are affiliated with the same body corporate at the same time, they are deemed to be affiliated with each other.
(2) For the purposes of this Act, a body corporate is controlled by a person if
(a) securities of the body corporate to which are attached more than 50% of the votes that may be cast to elect directors of the body corporate are held, other than by way of security only, by or for the benefit of that person, and
(b) the votes attached to those securities are sufficient, if exercised, to elect a majority of the directors of the body corporate.
(3) For the purposes of this Act, a body corporate is the holding body corporate of another if that other body corporate is its subsidiary.
(4) For the purposes of this Act, a body corporate is a subsidiary of another body corporate if
(a) it is controlled by
(i) that other,
(ii) that other and one or more bodies corporate, each of which is controlled by that other, or
(iii) 2 or more bodies corporate, each of which is controlled by that other,
(b) it is a subsidiary of a body corporate that is that otherís subsidiary.
* For the full statute, please click on this link. Nothing should be read in the abstract and specific legal advice is always recommended.