Entrepreneurship & Small Business

Is forming a corporation right for me?

  • Last Updated:
  • Aug 18th, 2021 12:15 pm
Aug 14, 2021
2 posts
1 upvote

Is forming a corporation right for me?

I run a very small-scale business (I'm a dog breeder), and my sons are a part of the business as well (they both contribute financially in the daily operations). Up until now I haven't had a registered business name. I've been dealing with my customer base between them & myself using my name (and not a business name). I've been thinking about registering a business name, and was wondering : Do you think a corporation would be overkill for a small scale business like mine?

I do have a concern that one day a customer may potentially come after me legally (although I haven't had any negative experiences in the past), and I don't want my house or my RRSP's to be up for grabs if things should turn sour.

What are your thoughts on this?
3 replies
Deal Addict
Feb 25, 2007
1438 posts
Incorporation usually makes sense for one of 3 reasons

1. Liability protection

2. Profit sprinkling/smoothing to save taxes

3. Because someone you want to do business with insists on it

The liability protection is not absolute -- you can still be liable as an individual for things you do really wrong, and as a Director for some things a corporation does or doesn't do. This tends to apply most to regulated professions and tax and employee withholding/payroll-type obligations, so *probably* many potential *future* liability issues could be controlled by incorporation. But I'm not a lawyer, so not sure of the details. Note it will not protect you from liability from anything you did (or failed to do) previously, or outside the business actitivites of the corporation.

The sprinkling refers to saving on taxes by delaying or smoothing out when you take profits, and how much gets paid to what family members, so as to keep people in low tax brackets. It really only applies if you're not living hand to mouth, i.e. your business is socking away more profits than you need each year to live on, or when some family members have other sources of income and others don't. That depends on your situation, but the involvement of your sons at least marks that as an option.

The above can also apply if you make losses in some years and profits in others. There are ways to navigate this without a corporation, but one does provide more flexibility for this scenario.

I doubt #3 (someone insists) applies in your instance. It's usually most applicable to (IT) consultants or other B2B services.

A generic answer, I know, but something to get started with :)
Sr. Member
Dec 3, 2019
510 posts
If it's a small scale business consider the additional cost of a corporation.

Filing taxes and corporate forms is not just a DIY job like personal taxes.
Accounting and legal costs are thousands of dollars per year.

Using those costs to buy an insurance policy instead might be more practical.
Deal Fanatic
Oct 7, 2007
9200 posts
I recommend doing the corporation. The legal protection against your assets is a big benefit to your protection, especially given the kind of business you are in. You may still want to get business insurance but I think a corporation is a great way to put your business on solid ground.


Thread Information

There is currently 1 user viewing this thread. (0 members and 1 guest)