Have you been told to incorporate your business? If so, this likely means your business is doing well and growing. Depending on the nature and structure of your business, knowing if and whento incorporate can be tricky.

Here are a few tips to help guide your decision:

1. Talk to an accountant before you incorporate. A corporation has additional costs, tax returns and CRA filing requirements – you want to be sure to understand what is needed to keep your company in good standing. Being paid tends to be a top priority for business owners, so it will also be important to understand the different ways of taking money out of the corporation (dividends, salary, shareholder loans, etc.) and the respective tax implications. Your accountant can advise on possible tax advantages to incorporation, such as a lifetime capital gains exemption for the shareholders.
2. Talk to a lawyer before you incorporate. Each corporation has minimum requirements it must meet under Alberta’s Business Corporations Act. Every year, a corporation must file an annual return with Corporate Registry and complete Director and Shareholder resolutions. A lawyer will advise you on these requirements and the annual costs of maintaining your corporation in good standing.  Your lawyer can also advise on the different classes and types of shares of a corporation and how to create a share structure that offers flexibility for future business and estate planning.
3. Consider your business succession plan. When do you want to retire? What will happen to your business when you are ready to stop working? Incorporation can be a beneficial tool for business owners to facilitate their succession plans. Selling shares in a corporation can be a tax-effective way to retire when you’re ready.

If you are thinking about incorporating, talk to your advisors to discuss the perks and costs, and whether this step is right for your business. At Pritchard & Co. Law Firm, LLP our corporate team is dedicated to helping you and your business succeed.