What is an incorporation? An Incorporation is a form of business that creates a separate legal entity from its owners (shareholders). Each owner is issued shares proportional to the percentage of ownership
The shareholders benefit from the limited liability aspect that incorporations come with. The owner of a corporation cannot be held liable personally for the debts, obligations, or acts of the company.
Enjoying the benefit limited liability, there are situations where shareholders of the company can be held personally liable: · Personally guaranteed loans: a start-up business that needs funding is unlikely to receive funding from financial institutions without providing personal guarantees from the shareholders
· Acts of fraud: Shareholders have a fiduciary duty to manage finances responsibly. Mishandling & misappropriation of funds & assets, incorrectly reporting company revenues or assets and/or claiming false expenses are examples of fraud in which the shareholders can be held responsible
· Taxes owing. The shareholders are responsible for paying corporate taxes, GST/PST taxes as well as payroll taxes.