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What Is An Incorporation? #shorts

4 Jul 2023 · 1 min

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Short explainer by Bob Gauvreau describing what incorporation means: a corporation is a separate legal entity with its own birth, location, parents, and reporting requirements. The video highlights legal-protection and tax implications, noting lower small-business corporate tax in Canada (~12.2%) and contrasting U.S. entities while mentioning the US C corporation (~20% tax rate).

Questions this video answers

12.2%

About 20%

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An incorporation is a separate legal entity if you want that entity to be protected away from you and protect your personal assets. A corporation is something that we set up. It has a date of birth, it has a location. It was born. It has its parents, and it also has this separate reporting requirement. It may be your best friend because of the tax rates associated with a corporate structure. In Ontario and across Canada, a corporation allows for small businesses to pay tax at 12.2%. The United States has a few different legal entities, but it doesn't give you access to that fixed tax rate. You're still subject to that marginal tax rate. Now, the other opportunity you have is a C corporation in the US that's very similar to the Canadian corporation model. The tax rate is about 20%. My best advice and guidance is to make sure you're working with your accountant and your lawyer.