Entrepreneur & Start-Up Incorporation

Contact Neufeld Legal PC for your incorporation legal work at 403-400-4092 or Chris@NeufeldLegal.com

Entrepreneurs and business start-ups in Calgary are incessentally focused upon the pursuit and development of their business enterprise, giving their full time and commitment to its advancement, such that it becomes important that you engage with an experienced corporate business lawyer to handle critical legal matters pertaining to your business' development, including the incorporation of a company through which you might best conduct that business enterprise.

The rationale for incorporation by entrepreneurs and business start-ups in Calgary includes:

A. Limited Personal Liability

  • This is often the most significant advantage. A corporation is a separate legal entity from its owners (shareholders). This means that your personal assets (e.g., your home, car, savings) are generally protected from the business's debts, liabilities, and legal obligations. If the corporation faces financial difficulties, bankruptcy, or a lawsuit, creditors typically can only pursue the assets of the corporation, not your personal wealth.

    • Caveat: While significant, this protection isn't absolute. Banks may require personal guarantees for loans, and directors can still be held liable for certain unremitted taxes (like GST/HST) or unpaid employee wages.

B. Tax Advantages

  • Alberta offers a favorable tax environment for corporations, which can lead to substantial tax savings:

    • Lower Corporate Tax Rates: Corporate tax rates in Alberta are often lower than personal income tax rates. This allows the business to retain more of its earnings for reinvestment and growth.

    • Small Business Deduction (SBD): Eligible Canadian-controlled private corporations (CCPCs) can benefit from the Small Business Deduction, which significantly reduces the corporate tax rate on the first $500,000 of active business income.

    • Tax Deferral: You can defer personal income tax by leaving profits within the corporation rather than immediately drawing them as salary or dividends. This allows you to control when and how you pay yourself, potentially optimizing your personal tax situation.

    • Income Splitting: In certain circumstances, an incorporated business can facilitate income splitting with family members (e.g., through dividends to family shareholders in lower tax brackets), which can reduce the overall tax burden for the family unit.

    • Lifetime Capital Gains Exemption (LCGE): This is a powerful tax benefit for eligible small business corporations. When you eventually sell your shares in a qualified small business corporation, a significant portion of the capital gain (currently over $1 million) may be exempt from taxation.

C. Enhanced Credibility and Professionalism

  • Perception: An incorporated business often appears more established, trustworthy, and professional to clients, suppliers, investors, and lenders. The "Ltd.," "Inc.," or "Corp." designation signifies a formal legal structure.

  • Business Opportunities: Some larger organizations or government contracts may only deal with incorporated entities, opening up new business opportunities.

D. Easier Access to Capital and Financing

  • Equity Financing: Corporations can raise capital by issuing shares to investors (angel investors, venture capitalists). This is a crucial method for growth-oriented startups that need significant funding without incurring debt.

  • Debt Financing: Lenders often view incorporated businesses as more stable and legitimate, which can make it easier to secure business loans and lines of credit. Some grants and government incentives are also exclusively available to incorporated businesses.

E. Perpetual Existence and Succession Planning

  • Continuity: Unlike a sole proprietorship, which ceases to exist if the owner dies or becomes incapacitated, a corporation has perpetual existence. It continues to operate even if ownership or management changes.

  • Simplified Transfer of Ownership: Shares of a corporation can be easily bought, sold, or transferred, simplifying succession planning and the eventual sale of the business. This makes estate planning more straightforward.

F. Name Protection (Provincial)

  • When you incorporate provincially in Alberta, your chosen corporate name is protected within Alberta, preventing others from registering an identical or confusingly similar name within the province.

G. Increased Privacy for Ownership

  • In Alberta, the details of a corporation's shareholders are not as publicly accessible as the details for sole proprietorships or partnerships, offering a degree of privacy for owners.

As such, when your business seeks the professional services of experienced legal counsel, whether when incorporating a new Alberta 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 at Chris@NeufeldLegal.com.

Incorporation of an Independent Contractor
Many job opportunities in the resource sector in Alberta (e.g., oil and gas, mining} are only available to you as an independent contractor (as opposed to an employee), with the principal company further requiring that as an independent contractor you provide your services through a corporation, which contracts with the principal company. As such, as part of accepting the work assignment, not only will you need to review and sign off on the independent contractor agreement, but also incorporate an appropriate corporation to perform the work. Read more.

Entrepreneur & Start-Up Incorporation
Entrepreneurs and business start-ups in Calgary are incessentally focused upon the pursuit and development of their business enterprise, giving their full time and commitment to its advancement, such that it becomes important that you engage with an experienced corporate business lawyer to handle critical legal matters pertaining to your business' development, including the incorporation of a company through which you might best conduct that business enterprise. Read more.

 

Why a Named Company (as opposed to a numbered company)

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