Separate Legal Entity
A corporation has the same rights and obligations under Canadian law as a natural person. A corporation can acquire assets, go into debt, enter into contracts, sue or be sued, and even in some situations be found guilty of committing a crime.
Shareholders of a company are not liable for the company's debts. If the company goes bankrupt, then a shareholder will not lose more than his or her investment (unless the shareholder has provided personal guarantees for the company's debts). A creditor cannot sue shareholders for liabilities incurred by the corporation, even though shareholders are owners of the corporation.
Lower Corporate Tax Rates
A corporation is taxed separately from its owners and generally at a lower tax rate. For example, active private companies in Ontario pay a combined flat tax of less than half that of an individual in the highest tax bracket on the first $400,000 of taxable income.
Greater Access to Capital
Raising capital is often easier for corporations than for other forms of business. For example, corporations are entitled to issue bonds or share certificates to those who invest money in the company. Other forms of business must rely solely on their own money and loans for capital. Corporations often are able to borrow capital at a much lower rate than other forms of business. This is because financial institutions and other sources of financing perceive loans to corporations as being less risky investments.
Unlike a partnership or sole proprietorship, a corporation does not cease to exist upon the death of its owners. Ownership would transfer to the shareholders' heirs, and the corporation would still live on. This assurance of continuous existence gives a business greater stability, allowing it to carry out planning over a longer term and to obtain more favourable financing terms.