Daisy Chu & Company Inc.

FOUR TYPES OF FIRMS

Sole Proprietorship

Business is usually owned and run by one person

Typically have few, if any, employees

Advantage: easy to create

Disadvantage: unlimited personal liabilities; limited life

Partnership

Similar to sole proprietorship but with more than one owner

All partners are personally liable for all of the firm’s debts; a leader can require any partner to repay all of the firm’s outstanding debts

The partnership ends with the death or withdrawal of any single partner

Two Types of Partnership

General Partners:

Have the same right and liabilities as partners in a “regular” partnership

Typically run the firm on a day-to-day basis

Limited Partners:

Have limited liability and cannot lose more than their initial investment

Have no management authority and cannot legally be involved in the managerial decision making for the business

Limited Liability Company (LLC)

All owners have limited liability, but they can also run the business

Corporation

A legal entity separate from its owners:

Has many of the legal powers individuals have such as the ability to enter into contracts, own assets, and borrow money
The corporation is solely responsible for its obligations; its owners are not liable for any obligation the corporation enters into

Corporation must be legally formed

four

STEPS TO INCORPORATING COMPANY

To incorporate a company in BC, one or more persons (called the incorporators) may form a company by completing the following steps:

Reserve the company’s name with the Corporate Registry

Enter into an incorporation agreement

Establish the company’s articles and

File an incorporation application with the Corporate Registry

After you filed the Incorporation Application electronically and the company is incorporated, the Corporate Registry will send you the original Certificate of Incorporation, a certified copy of the Incorporation Application and a certified copy of the Notice of Articles. These documents must be kept by the company as part of the company’s records.

The fee to incorporate a company by filing an Incorporation Application using Corporate Online is $350.00 and a BC online service fee of $1.50 plus HST.

steps

becoming

BECOMING A NON-RESIDENT OF CANADA

You are a non-resident for tax purposes if you:

Normally or routinely live in another country and are not considered a resident of Canada

Do not have residential ties* in Canada and

A: You live outside Canada throughout the tax year or

B: Stay in Canada for less than 183 days in the tax year

*Residential ties include:

A home in Canada

A spouse/common law partner or dependants in Canada

Personal property in Canada, such as a car/furniture and

Social ties in Canada

Other ties that may be relevant:

Canadian driver’s license

Canadian bank accounts/credit cards

Health insurance with a Canada province/territory

Tax Obligations
As a non-resident, you pay tax on income you receive from sources in Canada. This applies to the year you leave Canada and each year afterwards, provided you remain a non-resident for tax purposes.

DEDUCTIBLE INSURANCE

Advantage of corporate-owned life insurance:

Lower after-tax cost of premiums

Increased flexibility in buy/sell situations

Possible collateralization and thus a source of cash for the corporation

Less cumbersome in multiple shareholder situation

Shareholder preferences for spending corporation rather than personal dollars

Increased assurance that funds are available to pay required premiums and that these premiums are paid on a regular basis

Deductibility of insurance for tax purposes:

When the policy is used as a collateral, a corporation may be able to deduct all or a portion of the life insurance premiums

Premiums are considered to be a taxable benefit received in an employment context

deductible