It takes a special kind of person to start a new business venture or to transform an existing business. In Ontario, there are several different forms that a business can take, each with its own sets of advantages and disadvantages. For example, instead of a sole proprietorship or partnership, the owner may choose to turn a business into a corporation, a type of company governed by a separate branch of business law.
A business can be incorporated at either the federal or provincial level. By incorporating, the business becomes a separate legal entity from the individuals who own it. This means that the shareholders generally cannot be held personally liable for the acts or debts of the corporation.
There are many reasons one might wish to incorporate. For example, a shareholder’s liability is limited to the value of his or her investment. Transferring ownership of a corporation is possible, and legally separating the company from the owners may help ensure the continuous existence of the business. There are also numerous potential tax advantages for corporations.
Aside from the benefits, corporations face tight regulations in Ontario. Incorporation is also more expensive to set up than other business models. It requires the keeping of detailed records and filing of those records with the government. Because shareholders all have a stake in the business, there is potential for conflict between shareholders and the company’s directors.
Individuals who choose to start a new business or take an existing business in a new direction embark on a challenging and exciting endeavour. At the outset, business owners are prudent to first consult with a legal professional. A lawyer who is knowledgeable with Ontario business law can provide direction on the challenges that may be coming, and help ensure a smooth launch or transformation.