Should You Incorporate a BC Company? A Business Lawyer Explains
One of the most common questions I get as a business lawyer in British Columbia is:
“Should I incorporate my business?”
And the short answer? It depends.
Let’s break it down - starting with the basics.
What Does It Mean to Incorporate in British Columbia?
When you incorporate a business in BC, you are creating a separate legal entity under the law. That means your company is treated as its own “person” -legally distinct from you, the owner. If you are currently running your business as a sole-proprietor, you and your business are one and the same legal entity.
This legal separation is important for both liability protection and tax planning - two major reasons entrepreneurs choose to incorporate.
When Should You Incorporate Your Business in British Columbia?
Here are two key reasons why small business owners choose to incorporate a BC company:
1. To Limit Personal Liability
When your business is incorporated, any debts or legal liabilities usually belong to the company - not you personally (except in certain situations, outside the scope of this post) because you and your business are now two distinct legal entities. This can help protect your personal assets (like your home or savings) from business-related risks, lawsuits, or debts.
For example, if you run a higher-risk business like a fitness studio, restaurant or construction business, incorporation can create a legal buffer between your personal finances and any claims made against the business.
2. For Tax Efficiency and Flexibility
Incorporating can also offer corporate tax advantages. BC companies benefit from lower corporate tax rates compared to personal income tax rates, and incorporation allows for income splitting, tax deferral, and shareholder structuring.
There’s no exact income threshold that means you should to incorporate (I often see “6-figures” being touted, but this isn’t necessarily the case) but a common rule of thumb is:
If your business earns more than you need to withdraw personally, it might be time to incorporate.
I always recommend talk to your accountant before making the leap. They can assess your income, goals, and whether incorporation makes financial sense for you. Also, if you are transitioning from a sole-proprietorship to a company, you will want to ensure that by doing so, you aren’t triggering an unexpected tax consequence - so if you’ve been operating your business for awhile, best to check in with an accountant and a lawyer before incorporating.
Other Benefits of Incorporating a BC Company
Beyond liability and tax planning, here are a few more reasons why incorporation might make sense:
Estate planning: A corporation continues to exist even after the owner’s death.
Selling the business: Corporations are easier to transfer or sell than sole proprietorships.
Raising capital: You must be incorporated to issue shares to investors.
Name protection: Incorporation gives your business stronger name protection in BC (or Canada, if you incorporate federally).
Access to financing: Lenders often prefer to work with incorporated companies.
Pro tip: If name protection is important to you, we should also talk about trademarks - it’s a separate legal tool that offers broader name and brand protection. Incorporating a business offers only limited name protection so if your business name is important to you, you should really consider trademarking it (in Canada and even in the US).
Why You Might Not Want to Incorporate (Yet)
Incorporation isn’t always the right choice - especially in the early stages of business. Here's why:
Upfront costs: Government registration fees, name reservation fees, and legal fees can add up.
Ongoing requirements: You must keep your corporate records and minute book up to date, file annual reports with BC Registries, and maintain your company’s compliance. It’s not overly expensive, but just one more administrative task
Separate tax filing: Corporations file their own tax returns, which are often more complex and costly to prepare than personal returns.
Additional agreements - if you are incorporating with a business partner, I highly recommend having a shareholders agreement drafted to set out your respective responsibilities and running of your company. Read more about shareholder agreements in THIS POST.
These responsibilities can be managed and the expenses might not outweigh the tax benefits of incorporating, but it’s important to go in with eyes wide open.
So… Should You Incorporate Your Business in BC?
There’s no one-size-fits-all answer. Incorporation can offer huge advantages - but only if it fits your business goals, income level, and risk profile.
If you’re not sure whether to incorporate or keep operating as a sole proprietorship, I’d be happy to talk it through with you. As a BC business lawyer, I help entrepreneurs decide whether incorporation is right for them and then can support you with all the steps along the way. I offer flat-fee, inclusive rates for all my incorporation services, so there are no unexpected costs.
FAQs About Incorporating in British Columbia
How much does it cost to incorporate a company in BC?
BC registry fees are $351.50, plus name reservation and legal fees. Working with a lawyer ensures everything is set up correctly from day one, including advice on an appropriate share structure to allow growth and flexibility down the road.
Do I need a lawyer to incorporate in BC?
Not legally — but a lawyer can draft your incorporation documents, set up your share structure properly, and make sure you’re legally protected. They can also work closely with your accountant to help you avoid potential hefty tax consequences of transitioning from a sole proprietorship to a company.
Can I incorporate federally instead of in BC?
Yes. Federal incorporation can give you broader name protection across Canada, but also requires extra filings and is about twice the upfront cost in BC as you will also need to extra-provincially register in British Columbia. I don’t often recommend federally incorporating BC based businesses, but we can discuss this if you think it might be suitable based on your business goals.
Need Help Incorporating a BC Company?
Whether you’re starting a new business or think it might be time to incorporate your business, I’d be happy to support you take this next step.
BOOK A CALL HERE to get started with your BC company incorporation, or let’s chat about whether it’s the right move for you.
