Who should form a corporation?
Because of the expense and formalities involved in setting up a corporation and issuing stock (shares in the corporation), you should form a corporation only if you have good reason to do so. If you merely want to limit your personal liability for business debts, forming a limited liability company (LLC) is probably smarter, because LLCs are both less expensive to form and less complex to run. But here are some situations in which incorporating your business instead of forming an LLC may make sense: Your business needs the ability to issue stock or stock options to attract key employees or outside investment capital. Your business is so profitable that you can save significant income tax dollars by keeping some profits in the corporation each year. This strategy is called “income splitting” because profits are essentially split between the individual owners and the corporation itself.
Because of the expense and formalities involved in setting up a corporation and issuing stock (shares in the corporation), you should form a corporation only if you have good reason to do so. If you merely want to limit your personal liability for business debts, forming a limited liability company (LLC) is probably smarter, because LLCs cost less to form and are easier to run. But here are some situations in which incorporating your business instead of forming an LLC may make sense: • Your business needs the ability to issue stock or stock options to attract key employees or outside investment capital. • Your business is so profitable that you can save significant income tax dollars by keeping some profits in the corporation each year. This strategy, called “income splitting,” takes advantage of the lower tax rates on corporate income up to $75,000.
Because of the expense and formalities involved in setting up a corporation and issuing stock (shares in the corporation), you should form a corporation only if you have good reason to do so. If you merely want to limit your personal liability for business debts, forming a limited liability company (LLC) is probably smarter, because LLCs are both less expensive to form and less complex to run. But here are some situations in which incorporating your business instead of forming an LLC may make sense: • Your business needs the ability to issue stock or stock options to attract key employees or outside investment capital. • Your business is so profitable that you can save significant income tax dollars by keeping some profits in the corporation each year. This strategy is called “income splitting” because profits are essentially split between the individual owners and the corporation itself. • You own a family business and you want to begin making gifts of ownership to your family as part
