Reasons to Incorporate:
You can afford to leave excess cash in the business and want to take advantage of lower tax rates.
For legal liability reasons.
As a separate legal entity, a corporation gives you more options when selling/transitioning the business. You may also be able to use the capital gains exemption.
Being incorporated can be viewed as more credible and professional to potential customers/clients/lenders.
Reasons Not to Incorporate:
You need all excess cash personally and would be pulling it out or using it for personal expenses.
If you have made personal guarantees on business debt (e.g. to a bank), your liability may not be as limited as expected by incorporating.
There will be extra costs, including incorporation costs, annual fees, a separate corporate tax return to file each year, and applicable legal and professional fees.
As a sole proprietor, you can still have a business number, GST account, and a payroll account to pay employees. You are also eligible for the same deductions as a corporation.
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