Canada Incorporation Frequently Asked Questions
A corporation is a company that is owned by its shareholders. The shareholders, who are comprised mainly of those who formed the corporation as well as individual investors, elect a board of directors to oversee the company’s activities. One instance where the shareholders do not participate is when the company is being held liable for its debts and any actions it takes that affect the business in an adverse manner. These situations are the responsibility of the corporation.
A corporate structure may well be the best way to open a business because the corporation exists separately from its shareholders.
Corporations are owned by their stockholders, who share in the gains and losses generated by the company, and have three distinct characteristics:
Limited Liability, and
Continuity of Existence.
A corporation can operate as a for-profit entity, as virtually all companies are. A corporation also can also exist as a not-for-profit entity. This would fall under the category of charitable organizations. They have the right to loan money, borrow it, enter into contract agreements, sue other companies, hire employees, and to purchase assets.
A corporation is different from other types of businesses in that it is a legal entity, individual and separate from those who own and manage it, who are otherwise known as its shareholders.
A corporation is considered, by corporation law and various tax laws, to be a “legal person” who can fall into debt and owe taxes, separately from its owners. In general, a corporation has all the legal rights of an individual, except for the right to vote and some other restrictions.
Incorporation Frequently Asked Questions
What are the advantages of incorporation?
What are the disadvantages of incorporation?
What kinds of businesses can incorporate under the Business Corporations Act?