Incorporation or sole proprietor

I am doing some research.
For a relatively small operation, is it reasonable to operate as a sole proprietor with adequate insurance, or is there a real benefit to incorporatiing? I always felt that the corporation shielded one from liability issues, but that shield has been eroded so much over the years that I question the benefit.

What makes you say that?

well if somebody sues you and you have a corp. they can still come after you the owner, but they cant take any of your personal assets, like your home,cars etc.

In California it is very expensive to incorporate, so unless you make over 100k per year it is really not worth it for saving money on taxes that is.

Ps: I am not Incorporated

I think if you are a small operation, you do not need the additional expense that goes along with this. Ultimately I think it is good, but realistically, how much damage will you cause as a window cleaner, that this is really an issue. If you do any high rise stuff then sure, it is an issue.

In Canada, like the topic is posted under, it is severely eroded, by the govt, and by the courts, it is almost not worth the effort. It is also very expensive in Canada to incorporate, so shop around, I paid about $1500 but have since found ways to only pay about $450 using para-legals, so the extra would go very far for my family and not some rich cat lawyer, with over inflated billing systems… very over inflated.


So true, John.

In fact, I recently learned that unless your corporation is separated from the undersigning creditors/directors that started it, they’re essentially liable too.

Apparently, a holding company is the answer. The holding company can be set up as the “middle-man” legal entity that “owns” the corporation, separating the actual people that direct and own the holding company from the corporation’s liability.

So, a 3-layered separation. 3 tax returns. Or so I understand.

I incorporated because I got a mammoth WC job with a lot of potential for disaster, and wanted to protect myself a bit. There are tax advantages, too, depending on your company’s gross and net revenue.

And you have more flexibility with some write-offs.

P.S. I incorporated Jan 1, 2006, for $350.

That’s it. No lawyers or para-legals needed.

I do not think you answered the question I posed – why has the “shield been eroded so much over the years”?

I’m still curious (even as a non-Canadian) – how has the value of incorporation been “eroded” by the government and courts?

When I incorporated (yes, I am) I thought that it was giving me arms length ownership - I would not be held liable for problems created by the company, and that car loans, etc. would be easier. I found out very quickly that anything of a financial nature in the company has to be cosigned by the director (me). Corporation directors are liable for the actions of the companies with the ministry of labour and workers compensation as well as banks, government, …

So the second part of my question- Can one insure oneself adequately to protect against liability issues?

Only if you do it like Kevin has stated with a shell company, I think.
put everything in your wifes name
then make yourself the operations manager, dail manager
then give yourself and her signing authority, that way, she is the Pres/Ceo and you are working on her behalf or the companies behalf,
may by list your kids as board of directors, and you hold meeting and tell them how their inheritance is working out for them… and update them on the company. Only way I can see to distance yourself enough to be able to to it other than Kevin’s way.

What I mean is to not be incorporated but, through insurance or some other method, be secure from liability

good question, I am meeting with Insurance agencies this week and next, I will ask each of them this quesiton, it has been nagging at me as well.

no you cant. somebody has to be liable for something.

I am incorporated.

I did it myself, by going down to the appropriate government office. It cost $360 dollars.

Yeah I’m interested too…

Actually, the government views legal entities pretty much like people.

You can make something liable, and not someone, if you play by the rules. That’s why billionaires keep their mansions when their company’s go belly up. There’s a legal separation.

Answer number one- I asked my insurance broker about this and he says that insurance is the same whether one is incorporated or not. It has nothing to do with shielding the owner from liability.

Answer number-the-other-one (anyone get the Tigger reference?). I spoke with an accountant and his professional advice is to be incorporated is the ideal scenario. Case closed for me.