Sometimes, life takes unexpected turns. One day, you’re baking a cake for a friend for her son’s birthday party, and then a month goes by and you’ve had a few more requests (some from people you don’t even know!) and they’re offering to pay you.

Then, suddenly, it has been a year and you’re baking cakes every single day, often for more money hourly than you make at your day job. Finally, you decide it’s time to quit and pursue your dream of being a baker full time.

Now that it has been a few years, you’re looking at incorporating your business to make it official. However, you really don’t know that much about it—only that it is a thing businesses sometimes do.

In this article, you’ll find the various reasons a business might incorporate, as well as information on whether you should do the same, and how you can make it happen.

Why Do Businesses Incorporate?

There are many reasons that businesses eventually incorporate, including the tax benefits and limited liability that goes along with it.

In terms of liability, incorporating can save you from a lot of headaches. When you incorporate your business, you separate your personal assets from that of your business. In fact, should someone decide to sue you, you can only lose the amount of money that you’ve invested into the business.
That means that your home, car, savings accounts, etc. are safe from legal retribution.

Additionally, you can save quite a bit on your taxes by incorporating your business. This is because, in Canada, corporate tax rates are much lower than individual tax rates.

For example, if you were to earn $200,000 in a year, you could be taxed as an individual at 46%. However, a corporation earning the same amount would only be taxed at 11%.

When Should I Incorporate My Business?

In general, only you can make the decision about when it is a good time to incorporate your business.Our best recommendation, however, is that if you are in a high-risk field (that is, a field of work with a high likelihood of being sued) you may want to do it as soon as possible. For other industries, you can hold off until you have enough assets that you want to protect or you have enough income to need or want tax savings.

How Do I Incorporate My Business?

Incorporating a business in Canada involves several steps. During this process, understanding what you need to do to have the appropriate documents prepared is essential. The documents you’ll need are:

• Business Name
• Articles of Incorporation
• Document Board of Directors
• Corporate Bylaws
• Shareholder Resolutions
• Director Resolutions
• Director Consents
• Share Subscriptions
• Share Issuances

Once you have these files gathered and are able to pay the filing fee (usually between $499 and $699), you can file for incorporation online. Once you complete the application and pay the fee, you’re all finished. All you have to do at that point is wait for your official paperwork to come in through the mail!

Final Thoughts

If you’re unsure whether incorporation is the right step for you at this time, we recommend contacting our professional CPA accountant for help.

At AP Accounting Solutions, our dedicated accountants are experienced with the nuances of business incorporation and can help you come to a decision that best benefits you. Contact us today for a consultation!