corporation is a form of business ownership that has an existence of
its own, separate from its owners. For this reason, corporations are
considered to be more permanent than other forms of business ownership.
Corporations can be identified by the inclusion of the words: LIMITED,
INCORPORATED, or CORPORATION (or appropriate abbreviations Ltd, Inc.)
after the company name. Because a corporation has a legal existence of
its own, it will not stop operating when the people running it quit,
retire or die.
Corporations are established to conduct
business, earn profits, and limit the personal liability of their
owners. The owners are only liable for their investment in the
business. If the business were to lose money they would not have to pay
out of their personal belongings. You may incorporate your company
federally or provincially. It's cheaper to do so provincially, but that
may limit the ways you can do business in other provinces. In order to
incorporate, a business must apply to the provincial or federal
government for a charter. This charter grants the business permission
to operate and raise capital by selling shares to investors (commonly
referred to as shareholders). The investors are the owners of the
There are two kinds of business corporations
- private and public. A private corporation or company is one in which
shares can't be sold to the public, shares can be transferred only with
the permission of the shareholders. The shares of a public company can
be sold through the stock exchange to anyone who wants to buy them.
Privately owned corporations give their owners more control, but this
also means there is less capital available to use.
Ease of raising
Ease to expansion.
for all owners, that means you can't be held personally liable for
debts if your company doesn't succeed unless you have personally
guaranteed the obligations of the corporation. You can lose only your
advantages depending on the type of capital. Owning a private company
makes you eligible for certain tax breaks.
choose a fiscal year-end that is most convenient for the business.
business, regardless of the ills that might befall the owners or other
things what happens to individual owners. A corporation can only be
ended when its charter expires, its shareholders elect to give its
charter up or bankruptcy is declared.
costs. You have to pay an incorporation fee to the government, do a
name search and you usually have to hire a lawyer.
accounting and meeting records required. You'll be loaded down with
paperwork which various governments oblige you to fill out.
Double taxation (
profits of the business are taxed, and shareholders are also taxed
based on their income from the business ). If net income of your
business is to low, you may actually pay more in taxes than you would
if you were simply filing your personal income tax (or if you have
losses, these will not be deductible against other sources of your
by low, entitled to know the annual income and debts of a company. If
this information falls into the hands of competitors, they may use it
to their advantage.
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