A corporation is a type of business entity that is registered under a provincial or federal act. It is considered a separate person, both legally and for taxation purposes. Corporations usually have a name followed by a choice of the words, Corporation, Corp., Incorporated, Inc. Limited, or Ltd.
- Income is taxed at a rate different than that of the owners.
- Tax rates are usually lower that individuals.
- There are more opportunities for tax planning.
- More expensive than sole proprietors to set up.
- Separate financial statements and income tax returns are required. Accounting and legal expenses are higher due to statutory and taxation requirements.
- Tax rate advantages dissipate if corporate earnings are withdrawn by owners (shareholders)