Connie den Hollander, LLB
On Business Law
Incorporating - the Advantages and Disadvantages
Corporations are a separate entity - like another person. As such they require special consideration and hold individual rights.
Advantages
The advantages of incorporating may include multiple shareholders, multiple directors, shareholder dividends, directors' wages (but remember the directors' personal income tax implications that accompany these wages), estate advantages (ownership can be inherited), limited liability (although directors can be held liable for some outstanding debts of the company such as unpaid
CPP or EI remittances).
Disadvantages
Disadvantages are increased cost and time, and often personal guarantees for loans. It can be costly to set up a corporation says den Hollander, because this includes name search and registration fees, incorporating documents, annual reporting, and usually legal and accounting fees. A corporate income tax return is also required. On the death of a partner, the spouse may inherit which could bring with it another set of problems. Den Hollander suggests consulting an accountant prior to setting up a corporation.
Business Name Registration
Every business name must be registered. The current Corporations Branch fee in Saskatchewan is $110 for three years, with a $50 renewal fee. Name search costs $50 provincially and $60 federally if you wish to register interprovincially.
Collections
Den Hollander says businesses should get an "invoice of credit agreement" before doing business with new clients. This document gives a personal guarantee, sets out interest rates payable on overdue accounts, and provides personal references.
To collect outstanding debts, she says, you need a demand letter. This letter sets out the amount owing, date debt incurred, services provided, deadline for payment before legal recourse, and the statement that legal recourse will occur if the debt is not paid by the date indicated. Then contact Small Claims court or a lawyer. Today Small Claims Court has a mediation process.
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collingridge@sasktel.net