Business Lawyers

1. Shareholders: Typically, shareholders have limited liability, meaning they are not personally responsible for the corporation’s debts and obligations beyond their investment in shares. However, if a shareholder provides a personal guarantee for a corporate debt, they can be held personally liable for that debt.
2. Directors: Directors are responsible for overseeing the management of the corporation and making major decisions. They owe fiduciary duties to the corporation, including the duty of care and the duty of loyalty. Directors can be held personally liable for certain corporate actions, such as unpaid wages or taxes, if they fail to fulfil their statutory obligations.
3. Officers: Officers are appointed by the directors to manage the day-to-day operations of the corporation. They also owe fiduciary duties to the corporation and can be held liable for breaches of these duties.

The legal aspects of corporations encompass a wide range of issues, including the formation of the corporation, compliance with provincial and federal laws, governance structures, shareholder rights and remedies, and potential liabilities arising from the corporation’s activities.

Shareholders are generally not personally liable for the corporation’s debts or obligations beyond their investment. However, directors can be held liable for breaking their fiduciary duties to the corporation. Examples include failing to act in the best interests of the business, misusing its assets for personal gain, or not complying with laws governing corporate taxation, independent of the corporation’s debts.

The benefit of owning a corporation is offers various tax advantages such as enhanced credibility, and easier access to capital. However, there might be an exception if personal guarantees have been provided.

Legal duties of a corporate owner involve fulfilling fiduciary duties with dedication. For example, maintaining regulatory compliance, timely financial reporting with no errors, and many more.

Sole proprietorship refers to business ownership consisting of a single owner. In other words, these businesses involve one individual who has the autonomy to make essential policy decisions. As a result, sole proprietorship businesses work through a singular chain of commands. Furthermore, since the business is run by a single entity, the taxes must also be paid by the business’s sole owner. 

Naturally, sole proprietorship comes under the jurisdiction of tax filing. There are many important tax considerations if you happen to own a sole proprietorship. The entire profit from the business is included in the personal income tax of the business owner. On the other hand, if the business runs into losses, the owner can deduct the amount equivalent to the loss from his net income in the respective year. This will determine the flow of funds from the owner’s personal wealth and lower the personal income tax. Also, in case of profits, the net amount is taxed at a higher income tax rate compared to the corporate income tax.

Partnerships involve two or more entities sharing profits and responsibilities. Advantages include pooling of resources and skills, ease of formation, and tax advantages in cases of losses. Disadvantages include personal liability for debts and actions of other partners, difficulty in transferring ownership, and potential disputes.

Tax-wise, each partner pays tax on their share of the profits according to their personal tax rates, and partnerships as entities do not benefit from tax deferral and income splitting.

A corporation is an independent legal entity, separate from its owners, who are not legally connected to the corporation’s obligations, such as lawsuits, taxes, and assets. Legally, the corporation’s owners, officers, shareholders, and directors have limited responsibility for the corporation’s legal obligations. However, directors can be responsible for certain taxes collected on behalf of agencies like Revenue Canada. Corporations operate independently, issue shares to the public, and shares can be transferred unless restricted. Incorporation, Limited, or Corporation must be part of the business name, indicating that the owners are not legally bound by the corporation’s liabilities.
Advantages of Corporations:

• Operations independent of owners, with limited liability.Except in rare circumstances where the corporate veil can be pierced, a shareholder/director can be found liable.
• Shareholders not responsible for the corporation’s legal issues, taxes, or debts unless personally guaranteed.
• Corporations can operate perpetually, with ownership transferable to new shareholders.
• Easier business expansion through share issuance.
• Tax advantages like tax deferral strategies and income splitting.

Disadvantages of Corporations:

• Subject to dual income taxation on corporate and personal income.
• Higher initial setup and registration costs.
• Complex regulatory requirements and legal hurdles.
• Obligatory maintenance of a corporate law book detailing corporate bylaws and meeting minutes.