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Business Registration – Corporation


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A corporation is a separate legal entity. It can enter into contracts and own property in its own name, separately and distinctly from its owners. It has to pay tax on its income, and therefore must file its own income tax return. The corporation is the most complex of the three business structures.A corporation is usually formed under the authority of a provincial government. Corporations which do business in more than one province must comply with the Federal laws regarding inter-province commerce and with the provincial laws, which may vary considerably.

General Corporation (or “C Corporation”) is the most common corporate structure, for medium and large companies in particular. Characteristics include:

  • Anonymity of Directors and Shareholders
  • Unlimited Number of Shareholders
  • Separate Legal Entity
  • Taxation of Profits and Losses at the Corporate Level
  • Possibility to Raise Capital with Sale of Shares
  • Easy Transfer of Shares
  • Tax Benefits
  • No Obligation for the Shareholders or Directors to be U.S. Citizens or Residents.

Advantages of Corporations:

  • Limited Liability – One of the key reasons for forming a corporation is the limited liability protection provided to its owners. Because a corporation is considered a separate legal entity, the shareholders have limited liability for the corporation’s debts. The personal assets of shareholders are not at risk for satisfying corporate debts or liabilities.
  • Corporate Tax Treatment – Since a corporation is a separate legal entity, it pays taxes separate and apart from its owners (at least in the typical C corporation). Owners of a corporation only pay taxes on corporate profits paid to them in the form of salaries, bonuses, and dividends. The corporation pays taxes, at the corporate rate, on any profits.
  • Attractive Investment – The built-in stock structure of a corporation makes it attractive to investors.

Disadvantages of Corporations:

  • Formalities – The proper corporate formalities of organizing and running a corporation must be followed in order to receive the benefits of being a corporation. A huge aspect of the corporate formalities that must be followed consists of paperwork. Reports and tax returns must be compiled and filed in a timely fashion; business bank accounts and records must be maintained and kept separate from personal accounts and assets; records must be kept of corporate actions, including meetings of shareholders and Board of Directors.
  • Tax Consequences – C corporations have potential double tax consequences-once when the company makes its profit, and a second time when dividends are paid to shareholders. S corporations can mitigate this tax issue.