Business owners have unique financial, investment, tax and estate planning needs. However, because most of their time, energy and resources are spent on the business, it is easy to give planning a lower priority. That’s why working with a Beacon advisor will not only help you put your unique plan in place, but will also result in an improved plan.
A partnership is an arrangement in which two or more individuals combine resources with a view towards sharing expenses and profits. Generally, there are two types of partnerships – general partnerships and limited partnerships. In a general partnership, the partners share in the management of the business and each is personally liable for all debts and liabilities of the business. Limited partnerships limit the liability
of each partner to the amount that partner has invested in the business. Limited partners are
not personally liable for debts of the business, but are prohibited from participating in the
day-to-day management of the business.
A corporation is another common business structure. Unlike proprietorships and partnerships, the law considers a corporation an entity that is separate from its owners, who are the shareholders. In fact, corporations file their own tax returns independent of shareholders, and corporate losses cannot be used to offset income on a shareholder’s personal tax return.
Ownership in a corporation can be easily changed through the purchase and sale of shares of the corporation, without impacting the operations of the corporation’s business. In regards to commercial activities, corporations have the same rights as individuals – they can sue, be sued and own and sell property.
Should You Incorporate Your Business?
Many businesses start out as a sole proprietorship or partnership and later become incorporated as the business grows and becomes profitable. Whether or not your business should incorporate depends on many factors. If one or more of the following describe your situation, incorporating your business may be a suitable option. Speak with your Beacon advisor, lawyer and accountant to determine if incorporating is right for you.
I dont spend all my income
The potential for liability is significant
I want flexibility with my tax reporting
I have a spouse/common law partner and/or adult children
I want to minimize tax on sale and at death
My business is seeking capital
I need to preserve income sensetive benefits
I am thinking ahead to retirement
Choosing an appropriate business structure that meets your needs is an important decision and will depend on the specifics of your situation. Professional financial, legal and accounting assistance is recommended.
Above information is courtsy of Mackenzie Investments Inc.