Quebec companies can be structured in different ways. These include sole proprietorships, partnerships and corporations.
Corporations are a popular choice among Quebec entrepreneurs. But what is a corporation and how exactly does this business structure work? What are its benefits?
Find out more below.
Corporations at a glance
A corporation is one of the possible legal business structures in Quebec. It differs from other legal entities in that the corporation is considered a legal person. This means that it is its own "person" under the law and is distinct from its officers and shareholders.
This gives the corporation several rights that are not granted to other companies that adopt a different legal structure. For example, a corporation can sign contracts in its own name, own various assets or even sue or be sued by someone else.
The main benefits of the corporation structure
Based on the definition of a corporation, it is clear that this corporate legal structure has many benefits. Here are the main ones.
One of the main factors that encourages entrepreneurs to proceed with the incorporation of their SME is the fact that corporations benefit from a better tax rate. In Quebec, incorporated SMEs are granted certain deductions at the provincial and federal levels.
However, tax rates and deductions may vary according to certain criteria. To benefit from this advantage as much as possible, SMEs often use corporate tax services to optimize their tax planning.
Less financial responsibility for shareholders
The shareholders of a corporation own shares in that company, which makes them the proprietors of that company. It might be logical to think that these shareholders hold a great deal of the company's fiscal and financial responsibility.
This is not the case. Since a corporation is its own legal entity, the majority of the responsibilities belong to the company itself. Shareholders are therefore highly protected because their personal liability is limited to the value of their shares.
Simplified business financing
Corporations also benefit from a greater variety of business financing methods. They can either borrow money from the bank or issue shares and bonds.
In order to issue new shares, a corporation must obtain the permission of the Autorité des marchés financiers. Once obtained, the company can receive funds without having to reimburse them or pay interest.
Enjoy the benefits of incorporated businesses
A corporation is therefore a corporate legal structure whereby a company becomes its own legal person. This type of company has several benefits, both for the company itself and for its shareholders.
Now that you know more about corporations, why not incorporate your SME? At T2inc, we can assist you throughout your business’ incorporation process and provide you with our best accounting and tax advice.
Contact us today to get a free quote!