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Perks and snags of corporations
By Samantha Garner | August 17, 2013
In our last couple of blog posts, we talked about how to start an incorporated business in Canada, and reviewed the contents of a Shareholders’ Agreement. Now, here are a few perks and snags that you may experience by incorporating your business.
Perks of corporations
- Limited liability of shareholders (liable only for the amount paid or owing for shares).
- Possible tax advantage through deferral of tax.
- Shareholders can only be held accountable for their investment in stock of the company.
- Transferrable ownership, and no limited lifetime of the company.
- Sale of stock allows for additional funds; easier to raise capital.
- Specialized management — management and ownership are separate.
- Benefits may be deducted.
- The business is a separate legal entity.
Snags of corporations
- The most time consuming and expensive form of organization.
- Federal and provincial agencies monitor corporations.
- Charter restrictions exist.
- There are legal formalities.
- There’s more paperwork, record-keeping and filing requirements, and everything’s closely regulated.
- Possible conflicts between shareholders and executives.
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