Is incorporation right for you?

When you launch a business, the type of corporate structure you choose matters. Here's what to consider to decide if incorporating — creating a corporation — is right for you.

Benefits of incorporating

  • Separate legal entity

    Incorporating your business creates a new legal entity, called a corporation.

    In Canada, a corporation has the same rights as a real person. It can own property, get loans, enter into contracts, sue or be sued, and even be found guilty of committing a crime.

  • Limited liability

    When forming a corporation, owners transfer money, property, or services to the corporation in exchange for shares. The owners of these shares are shareholders, and they have limited liability.

    Shareholders are not responsible for the corporation's debts. If a corporation goes bankrupt, incorporation protects shareholders (who will not lose more than their investment).

  • Lower tax rates

    Tax authorities tax corporations separately from their owners. Corporate tax rates are generally lower than income tax rates for individuals.

  • Better access to capital and grants

    Compared to other kinds of business structures, corporations can often raise money and grow more easily because they:

    • can issue bonds or shares to investors (rather than rely on their own money and loans for capital); and
    • borrow money at lower rates.

    Financial institutions see loans to corporations as less risky than those given to unincorporated businesses.

  • Continuous existence

    A corporation continues to exist unless it winds up, amalgamates, or gives up its charter for reasons such as bankruptcy. This is not the case for other types of business structures, which cease to exist when owners die.

Federal incorporation

While incorporating provincially or federally have common benefits, there are extra advantages to incorporating federally.

  • Use your name across Canada

    As a federal corporation, you can operate your business using your corporate name right across the country. This is important if you expand your business to other provinces or territories and want to use the same name.

  • Flexibility

    Choose where you want to set up your business ‒ your corporation's official address can be in any province or territory. A federal corporation can also hold its annual meeting outside of Canada or even digitally.

  • Global recognition

    Federal corporations are recognized around the world ‒ an important consideration if you plan to expand outside Canada.

Transcription — Federal incorporation

[A woman business owner is standing in her pho enterprise, with a man and child at her side.]

Narrator: Incorporating.

[The woman shakes some spices into two steaming bowls of pho.]

Narrator: Whether you are starting a business, or thinking about expanding, the word — and the prospect — can be intimidating.

[The woman shows concern and thoughtfulness.]

Narrator: After all, your business "journey" involves many stages…

[The woman is thinking while four images representing equipment, staff, income and cash flow pop on screen around her. Key: Is it right for you?]

Narrator: … adding equipment, adding staff, building income and cash flow. We are pretty sure the word "incorporation" has come up — and you're likely asking yourself if it's right for you.

[An image of Corporations Canada's website appears on a computer monitor.
Key:

  • More than 40,000 new incorporations per year
  • Simple, fast, painless]

Narrator: We are Corporations Canada, and we help over 40,000 businesses become federally incorporated every year, making the process simple… fast… and painless.

[On a computer screen, the words "Enter Business Name: Pat's Phopup" appear, with a green checkmark next to it and a maple leaf in the background. Key: Operate under one unique name nationally]

Narrator: So why incorporate with Corporations Canada? With federal incorporation, you have the right to use the name across Canada.

[On a computer screen appears a green-coloured dollar sign within a downward arrow. Key: Lower tax rates]

Narrator: You'll most likely lower your tax rate. Corporations are taxed separately from their owners.

[On a computer screen appears a shield with a dollar sign in its center. Key: Limited liability]

Narrator: You will be able to limit your liability.

[On a computer screen appears a vault. Key: Easier access to financial support]

Narrator: And… you may enjoy easier access to financing. As a corporation, you may be able to borrow money at lower rates.

[On a computer screen appears a clock, with two green arrows pointing toward the clock. Key: Incorporate within one day]

Narrator: Online incorporations cost $200 and you can be incorporated within one business day.

[On a computer screen appears an envelope with a small "1" in its top right hand corner. Key: Email confirmation within minutes]

Narrator: Within minutes of your incorporation, we will send an email that includes your business number, along with links to important information.

[The owner is holding a tablet (split-screen) with friendly-looking officer at computer workstation.]

Narrator: We are proud to offer you direct access to knowledgeable officers who can help answer your questions.

[The owner is holding a tablet and her male partner (in dark apron) stand offering bowls of pho to camera.]

Narrator: Corporations Canada: we can help you get back to doing the real work—building your business' future.

[On screen, two icons appear.
Website icon: www.canada.ca/federal-incorporation
Telephone icon: 1-866-333-5556 (toll-free in Canada)]

Narrator: Here's how reach us:

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