What is a corporation

As we stated in the introductory blog, “A corporation is an entity created by a person or a group of people for the purpose of creating a separate legal entity for themselves.”  A corporation has similar rights to that of an individual as it may earn income, borrow money, lend money, run business and more.  It is like having an artificial entity that you can control. 

Just like we get a Birth Certificate when we are born, a Corporation gets a Certificate of Incorporation when it is created or “born”.  The Certificate of Incorporation, along with the Articles of Incorporation gives the Corporation its existence.   Remember that the laws that the Corporation abides by is determined by the jurisdiction of where the Incorporation was formed.

Corporations typically have a different taxation system than individuals do.  Later in this series we will discuss some of the taxation rules of Corporations and how to maximize the tax savings of a corporation. 

As also mentioned in the past blog, Corporations offer a limited liability for the person or group of people that set up the corporation.  For instance the owner(s) of an incorporation, called the shareholder(s), take no real liability except for any money they have put into the corporation.  The Director of a corporation is the one that takes the liability.  This is the person that is the “operating mind” of the corporation.  Because there is a limited liability, the director is not responsible for all liabilities, only things like Government and CRA debts, environmental damage or any debts of the corporation that were personally guaranteed by the director.

Watch out for my next blog where we will get deeper into understanding the basics of the corporation and get to know the 3 main people or groups of people that make up a corporation. 

Introduction to the Blog Series: "Understanding the Corporation"

A corporation is an entity created by a person or a group of people for the purpose of creating a separate legal entity for themselves.  In other words, when a corporation is created it has a separate existence from any individuals, although it is set up and ran by individuals or groups of people.  This separate legal existence allows for liability protection, tax savings and estate planning to the extent that the jurisdiction where the corporation is set up allows within its rules and laws.  Although Corporations exist in countries all over the world, they are all similar in nature.  Also, a lot of provinces states and countries offer different types of corporations for different purposes.  For example, in The United States Corporations come in many forms such as Limited Liability Corporations (LLCs), S Corporations, C Corporations and more.  In Canada the main Corporations we use are Canadian Controlled Private Corporations (CCPCs), Professional Corporations, Public Corporations, Non Profit and Charitable Corporations.  In the scope of this series we will mostly be discussing the CCPCs as these are the Private Corporations that the everyday Canadian uses.  The other types of Corporations share similar traits and have similar rules so these blogs do have application to the different types of Corporations, and as usual if you have questions you can contact me.

In this series we will go cover what a corporation is, how to understand the basics of a Corporation, why and when to incorporate, ways to structure corporations, steps on incorporating, working with a corporation, maximizing the use of a corporation and how to sell, dissolve(close) or pass on an incorporation.  This is a much needed series that I know will educate and assist many.