Incorporation is just one method of carrying on business. There are several
ways to start a business: sole proprietorship, partnership and corporation.
Each structure has its tax and legal advantages and disadvantages. With
a corporation, you are required to file a separate tax return.
New Legal Entity
The incorporation process creates a new legal entity, which is distinct from the people involved. A corporation can own property and can sue or be sued in its own name. It continues to exist as directors and shareholders come and go. Limited Liability
The people involved in the corporation are generally not liable for the
obligations or debts of the corporation. Except in specific circumstances,
creditors can sue only the company for debts incurred, not the shareholders.
Lower Tax Rates
Since they are a separate legal entity from their owners, corporations
are taxed separately from their owners. This is usually at a lower tax
rate than the individual would otherwise be taxed at.
In general, a corporation means more paperwork. You must notify the government of changes in the address of the registered offices or of a change in the directors
corporation is required to file a separate tax return from the owner(s).
Similarly, you can no longer report business profits and/or losses directly on
your personal tax return.