Some of the advantages of incorporating a business include; the limited liability afforded to the business owner, the ability of the business to carry on after the owner’s death or leaving the business and the qualification for various government grants. There are also various tax advantages such as a lower tax rate on income, the ability to determine when to pay income to the owners and utilize potential tax deferral, income splitting with family members, potential small business tax deductions and potential capital gains exemptions.
It is important to realize that there are some disadvantages of incorporating as well. For instance, if the corporation incurs losses, you can not apply those losses to personal income. Also, the process of incorporation costs some money and there are ongoing tax, filing and record keeping requirements. Lastly, a corporation only limits the liabilities of the business owner, there still remain some potential risks to personal assets.