Perks and snags of corporations

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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