1. Limited Shareholder Liability
- Unlike sole proprietorships, corporations are separate legal entities that amongst otherthings, can enter into contracts, commence litigation and hold property in their own name. As a result, shareholder liability is limited unless a personal guarantee is provided.
2. Continued existence
- As a corporation is a separate legal entity, unless structured otherwise, the death or bankruptcy of a shareholder does not legal affect the existence of a corporation. However, the continued failure to file a corporation’s annual report can result in the company being struck from the registrar.
3. Tax savings including income splitting and deferrals
- Money earned by a corporation can be split into salary and dividends payable to a number of shareholders and employees. Depending on the payout structure, the overall tax payable per dollar earned by the corporation can be drastically reduced so that less taxes are paid over the shareholder’s lifetime and funds retained in the corporation can grow at a deferred tax rate.
4. The ability to raise capital for expansion and investment
- As a separate legal entity, a corporation can issue shares or borrow funds to raise capital.
5. Ownership can be easily transferred
- Corporations are owned by individuals, companies or organizations that holds their shares. Thus, in most cases, ownership can easily be transferred by transferring one’s shares to another party.