Yearly cost to incorporate?

As for maintaining the corporate status with the corporate entity, it is approximately $50 in BC. Not sure how much it is where you are.
The annual taxes could cost you $1500 or so depending on who you get to them and how complicated they are.

You are absolutely correct about the insurance part. You really need to ask all of the right questions up front before buying and make notes on EVERYTHING even when doing business. Always expect that the insurance people will not come through so that you have everything you need in the event you have to fight with them. This happened to someone I know and their detailed notes and attention to detail really helped them when it got ugly.

I hate the fact it is so damn expensive trying to turn a hobby into a small business just to make a few bucks... while not leaving your life's personal assets up to get raped.

$ 1500 to incorporate still seems much cheaper than the insurance part... Though I have heard that not always does incorporating protect your personal assets, sometimes people who sue find ways to work around it.

It's the liability part right now that really bothers me. If you make a little piece of jewelry, and some irresponsive parent lets a child swallow something, guess what? As stupid as it sounds, they can still sue for any ridiculous reason, even if it's their own damn fault. Grrrrrrrr.

It doesn't cost you anything beyond the annual renewal for the registration for a dormant company. That renewal fee depends on the province in which you registered. Here in Alberta it is $80 a year.

The only real costs are accounting and taxes. Those other costs will only become significant when you generate revenue. In that case, you will have to pay taxes. If you are paying taxes you'll need to file a corporate tax return. A smart business person will hire a good accountant to do that. That will start at $1,000 or so for a basic set of returns. A cheap person will file his own T2 and/or GST returns to "save" money. That being said, it is foolish to have a dormant company for long. If you don't have a real plan to make money with it in the near term, it is more effective to close the company and start a new one when you're ready. Either paying someone to file nil returns or doing it yourself for more than a few years is a waste.

BTW: Buying liability insurance has nothing to do with incorporating. The point of incorporating is to protect your personal assets from being included in any suit against your business. You can still be sued personally outside of your business. Insuring anything either personally or corporately is a separate financial risk mitigation decision.

DIY it and the annual costs are almost nothing.

" The point of incorporating is to protect your personal assets from being included in any suit against your business."
This is exactly the point on why I want to incorporate. But spending about 2K a year is a little hefty.

After the initial incorporation costs, we pay about $2500/ year in accounting and fees.

InvalidName wrote: ↑ " The point of incorporating is to protect your personal assets from being included in any suit against your business."
This is exactly the point on why I want to incorporate. But spending about 2K a year is a little hefty.

That is very far from the only point. The lower small business tax rate allows you to have greater capital to grow your business than you would if you paid it out and also to earn greater returns if that money is invested inside the corporation for the long term in an investment portfolio that enjoys positive returns overall.

Incorporation also allows you to have multiple owners of your business in a manner that partnership, and certainly not sole proprietorship, does not. There are also many other benefits to a corporation share structure.

One thing to remember is that incorporation does not totally protect you from liability for some matters such as specific forms of negligence/malfeasance or from director's liability. Furthermore a conveyance of assets from the corporation in order to strip them in anticipation of a lawsuit against the corporation is deemed a fraudulent conveyance and will not protect those assets thus stripped.

BC corporation annual filing fee $45 (do it yourself online).

Taxes: Depends how you do them. There's no fee for filling out the forms and filing them yourself with the CRA. $130 for a cheap business tax preparation package with efile (try webtax4b.ca). Could be $1000 or more if you pay a tax accounting firm.

Business bank account (in the corporation's name): usually has a fee, something like $6/month minimum, but there are a few free small business options with credit unions and such. You may need to get cheques printed with the business name as well.

If you pay yourself a salary, then you'll need to calculate and remit payroll taxes to the CRA monthly. There are some free payroll calculator options (e.g., Payment Evolution), and cheap ways to remit payment to the CRA online via a bank or payroll service.

Insurance: Whether or not your business requires property or liability or Errors&Omissions insurance is a feature of your business type. If you lease an office, the landlord will require you to have property and liability insurance. If you enter into contracts with larger companies, they often require you to have liability insurance. Some types of business also require E&O insurance for officers of the company to protect against being sued for something you should have done and failed to do. $2000/year is about the minimum you could expect for basic property and Commercial General Liability insurance, and E&O insurance can be much more. But if you're just operating a small side business from home that doesn't have any liability risk, then there's no real need for any of this insurance. Bloated official contracts issued by governments and large corporations may have a clause requiring you to have liability insurance, but they won't check.

You can't assume you will be paying the same amount of accounting fees like your relative, many factors to consider (size of the business, complexity of accounting, your location, how clean are your books, who do you hire as your accountant.....)., the annual accounting costs can vary from few hundred bucks to many thousands.

If you think you'll be doing this for the long haul, it is probably worth incorporating just for the sole reason of protecting your personal assets. Initial set up is a bit onerous and expensive but after you get a year or two under your belt, you'll have a better idea of how you can do things as inexpensively as possible. I wouldn't not consider it for fear of the unknown. Incorporating is not as difficult as some people think and does offer benefits in exchange for the effort.

I mentioned this on a previous post, I disagree with some of the liability protection statements here.

You can get quite a lot of liability protection from incorporating. I don't get why people say they don't.
As a one-man corporation, you are responsible for certain actions your business does since you are also the director and like the above posts mentioned, your personal assets are at risk.

But most of the time, someone who is suing you has to pierce the corporate veil in order to get at your personal assets. It doesn't mean you can't get sued personally for something you do though your business and you still will pay significant costs defending yourself but it does provide a layer of security between the business assets and personal assets.


To me, it comes down to what you want to protect and your risk tolerance (and line of work). Ie repair man or food businesses, I would incorporate regardless of how much I make -side job or not. It also depends on what you want to with the corporation as well.

ontbusiness2018 wrote: ↑ I mentioned this on a previous post, I disagree with some of the liability protection statements here.

You can get quite a lot of liability protection from incorporating. I don't get why people say they don't.
As a one-man corporation, you are responsible for certain actions your business does since you are also the director and like the above posts mentioned, your personal assets are at risk.

But most of the time, someone who is suing you has to pierce the corporate veil in order to get at your personal assets. It doesn't mean you can't get sued personally for something you do though your business and you still will pay significant costs defending yourself but it does provide a layer of security between the business assets and personal assets.


To me, it comes down to what you want to protect and your risk tolerance (and line of work). Ie repair man or food businesses, I would incorporate regardless of how much I make -side job or not. It also depends on what you want to with the corporation as well.

Yes you have to pierce the corporate veil. One instance where it is easy to do so is a fraudulent conveyance in anticipation of a lawsuit against the corporation.

eonibm wrote: ↑ Yes you have to pierce the corporate veil. One instance where it is easy to do so is a fraudulent conveyance in anticipation of a lawsuit against the corporation.

And for sure, if you do that, and they can prove you did that, yes your personal assets are it risk. I wouldn't really call it "easy" since they have to prove intent.

I rather limit my liability to my business rather than my personal assets. Especially in these days, but that's my two cents. It may not make financial sense when you only go calculating your business revenue to incorporate, but it might change your mind if you take into consideration your potential losses due to being sued.

Exp315 wrote: ↑ Bloated official contracts issued by governments and large corporations may have a clause requiring you to have liability insurance, but they won't check.

Correction! Any big corporation's risk management strategy involves diligently checking that contractors have adequate insurance coverage (at a minimum CGL and WCB). I do this for a living and demand certificates of insurance with adequate coverage and listing my company as an additional insured. If a client requires such insurance, they will probably check.

Anyway, to address the original question. Incorporation alone should not cost you that much money. Initial incorporation can be done with the purchase of a numbered company for about $500. Beyond that you just pay your provinces annual renewal fee of usually less than $100. Depending on the nature and size of your business there could be other additional annual expenses such as insurance, WCB, business license, accounting e.t.c

ontbusiness2018 wrote: ↑You can get quite a lot of liability protection from incorporating.
As a one-man corporation, you are responsible for certain actions your business does since you are also the director and like the above posts mentioned, your personal assets are at risk.
But most of the time, someone who is suing you has to pierce the corporate veil in order to get at your personal assets. It doesn't mean you can't get sued personally for something you do though your business and you still will pay significant costs defending yourself but it does provide a layer of security between the business assets and personal assets.

eonibm wrote: ↑Yes you have to pierce the corporate veil. One instance where it is easy to do so is a fraudulent conveyance in anticipation of a lawsuit against the corporation.

ontbusiness2018 wrote: ↑ And for sure, if you do that, and they can prove you did that, yes your personal assets are it risk. I wouldn't really call it "easy" since they have to prove intent.

Both of you are making compementary and valid points. In my area at least, if someone feels like suing you, they will sue both you and the company and try to negotiate, or failing that sort out later through the legal system. And they'll try to make the point you were -- as a professional, if relevant -- negligent how you carried out your work.

Proving fraudulent conveyance in anticipation shouldn't necessarily be easy, but when I talk to some peers, they might make it easy. "I'll keep my earnings in my company (to save on taxes), but I'd dividend them out if I get sued" will be pretty transparent if executed that way. Regularly dividending out earnings will make it hard to prove intent if the need arises, but removes many of the tax benefits of incorporation.

I'm not a lawyer. As a consultant (to largish companies), I've talked to lawyers on some on these issues when starting up and come to the conclusion that no liability protection strategy is perfect, but a patchwork can be reasonably effective

1. Scope of work/contracts. Be crystal clear what you are and are not doing, and what you are *not* guaranteeing in particular. Not perfect or sufficient in and of itself, but helpful.
2. Incorporation, to put a cap on run of the mill liability and sorta protect your personal assets.
3. Holding company structure, to allow you to get the benefits of incorporation as well as tax benefits of income smoothing. This costs extra $, of course.
4. Liability insurance, for me the bare $ minimum limit only. That's because *if* I really screwed up, in my field the damage could easily be bigger than any maximum limit any insco will offer my one-man shop anyway. So its effectiveness is protection against frivolous lawsuits, and compliance with contract/RFP requirements, rather than meaningful liability protection in a catastrophic situation.
5. Don't be rich. You can't get blood from a stone, and prospective litigants know that.

houska wrote: ↑ Both of you are making compementary and valid points. In my area at least, if someone feels like suing you, they will sue both you and the company and try to negotiate, or failing that sort out later through the legal system. And they'll try to make the point you were -- as a professional, if relevant -- negligent how you carried out your work.

It's not just in your area. The first rule of suing is to sue everyone in sight however tenuous their connection might be. Civil litigation lawyers also have a saying, "go after the assets" and you don't necessarily know where they will be and often your main target might not have enough to satisfy your lawsuit so that's why you do that. Of course just because someone somehow connected to the defendant, regardless of how tenuous that connection might be, has assets doesn't mean you will be successful in realizing upon them.

And yes I hear the same comments from people as you do regarding diverting assets if they get sued. People think it's oh so easy to get away with it. It ain't! It's going to be pretty easy to prove if you didn't take any money out of your corporation for years but the year you get sued you strip it, or even if you did take money out every year but suddenly you increased the amount appreciably before you get sued or during.

canuckstorm wrote: ↑ Correction! Any big corporation's risk management strategy involves diligently checking that contractors have adequate insurance coverage (at a minimum CGL and WCB). I do this for a living and demand certificates of insurance with adequate coverage and listing my company as an additional insured. If a client requires such insurance, they will probably check.

It depends on your industry. If there's a good reason to require such certifications in your industry, then they may well check. But in many industries the requirement is there in contracts only because there's one standard bloated contract that includes it by default, and they never check because it has no purpose. We've always carried CGL (because we need it for our office lease) and WCB coverage (because it's the law for all companies with a payroll). But not once in 20 years and thousands of contracts have we ever been asked to produce proof, even though the requirement appears frequently, because it's just not relevant in our industry. If you do business with organizations as large as the U.S. federal government, you will soon come to realize that technically with every contract you are signing up to terms and conditions that run to hundreds of thousands of clauses. You could never even read them all, let alone understand them all in detail. What you do is learn the norms of your particular industry, and follow those. The rest, you don't worry about it.