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When to incorporate a business

There are various ways in which invididuals can carry on business in Canada. One of the ways is to incorporate a company to own the business. Whether a person should incorporate is both an accounting and legal decision. If the individual derives sufficient profits from the business and does not need to use all of the profits, the accountant may recommend that the individual incorporate a corporation to carry on the business. If the individual is concerned about personal liabilities, a corporation is a separate legal entity and removes the personal liability from the individual.

Purchasing a business can be done in two ways. You can purchase the assets of a business and you can purchase the shares of the corporation that owns the business.

Purchase of Assets

A purchaser normally prefers to purchase the assets of a business. This way, the purchaser can decide on the liabilities that it wants to purchase. The assets are normally all of the intangible property used to operate the business. For example, for a restaurant, the assets would involve all of the chairs, tables and equipment used to operate the restaurant, as well as the leasehold improvements and the goodwill of the business.

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