A corporation can continue even if shareholders leave the business for whatever reason. The unlimited lifespan and continuance of a corporation is a big benefit.
Individuals, especially shareholders, have liability protection in a corporation. Unlike a sole proprietorship, the personal assets of individuals within the corporation cannot be seized by creditors, except in certain circumstances.
Corporations also have far more avenues for raising revenue. Access to capital means that the business can grow and develop more easily.
With the potential for tax deferral, corporations also have the opportunity to only be taxed on salaries. That means that it's possible to not have profits taxed, only personal income.
Incorporating in Canada involves far more formalities than a sole proprietorship. As a legal entity, they must hold director and shareholder meetings, keep corporate minutes, and always have board approval on major transactions. They also pay startup and annual fees.
If those formalities aren't met, then shareholders are at risk of losing their personal liability protection. This is one of the biggest risks of incorporating a company because creditors can then go after personal assets.
You can incorporate your business at the federal level with Corporations Canada or incorporate in a specific province or territory with the provincial/territorial government.
There are several benefits to incorporating federally:
Corporations Canada applies very tough tests before granting a company the right to use a particular name. When a company's name is approved, it's protected across the country – a status second only to trade-mark protection.
For more information on choosing and protecting your business name see Choosing a name.
Federally incorporated companies can carry on business anywhere in Canada, and there are no restrictions regarding the province or territory where the head office is located, corporate records are maintained and annual general meetings are held.
Federal incorporation is often considered a sign of distinction, companies incorporated federally receive global recognition as Canadian companies.
Corporations Canada offers clients an online service that allows you to send documents, pay fees, and receive documents and acknowledgments all via the internet without having to use an intermediary.
Despite these advantages, some businesses may choose to incorporate at the provincial or territorial level.