Asset Protection: Why You Should Consider a Corporation for Your Real Estate in Ontario
If you own real estate in Ontario, Canada, you should consider using a corporation to protect your assets. A corporation is a legal entity that is separate from its owners. Your personal assets are protected if your corporation is sued or goes bankrupt.
There are several benefits to using a corporation to hold your real estate assets. First, it can help to protect you from personal liability. If someone sues your corporation and wins, they can only collect from its assets, not your personal ones.
Second, a corporation can help to reduce your taxes. Corporations are taxed at a lower rate than individuals in Ontario. This means you can save money on taxes by holding your real estate assets in a corporation.
Third, a corporation can help you to plan for your estate. If you own real estate in a corporation, you can transfer the corporation to your heirs without paying probate taxes.
Pitfalls of Not Using a Corporation:
You may be exposed to several risks if you do not use a corporation to hold your real estate assets. First, you may be personally liable for any debts or liabilities of your real estate business. This means that if your business is sued or goes bankrupt, your creditors may be able to come after your assets, such as your home and savings.
Second, you may pay more taxes. Individuals are taxed at a higher rate than corporations in Ontario. This means you can save money on taxes by holding your real estate assets in a corporation.
Third, it may be more challenging to plan for your estate. If you own real estate personally, you must pay probate taxes when you die. This can be a significant expense, especially if you have a large estate.
Examples of Pitfalls:
Here are a few examples of the pitfalls that can occur if you do not use a corporation to hold your real estate assets:
- If you are personally sued, your creditors may be able to seize your personal assets, including your home and savings, to satisfy the judgment.
- If your real estate business goes bankrupt, you may be personally liable for the business's debts.
- You may pay more taxes on your real estate income if you own the property personally.
- It may be more difficult and expensive to transfer your real estate assets to your heirs if you own the property personally.
How to Set Up a Corporation:
Setting up a corporation is a relatively simple process. You can do it yourself or hire a lawyer to help you. To set up a corporation in Ontario, you will need to:
- Choose a name for your corporation. The name must be unique and cannot be the same as the name of another corporation in Ontario.
- File a Notice of Articles with the Ontario Business Registry. The Notice of Articles is a form that provides basic information about your corporation, such as its name, address, and directors.
- Pay a filing fee to the Ontario Business Registry.
- Issue shares in the corporation. Shares are ownership units in a corporation. You can issue shares to yourself, your family, or other investors.
- Hold a directors' meeting. The directors of a corporation are responsible for managing the corporation. At the first directors' meeting, you must elect directors and adopt bylaws for the corporation.
Conclusion:
Using a corporation to hold your real estate assets is an intelligent way to protect your assets and reduce taxes. If you own real estate in Ontario, Canada, you should consider setting up a corporation to hold your assets.
Importance of Seeking Expert Advice
There are many benefits to using a law professional when using a corporation to protect your assets and real estate in Ontario. Some of the most important benefits include:
- Compliance with the law: A lawyer can help ensure that your corporation is incorporated correctly and complies with all applicable laws and regulations. This can help to avoid costly legal problems down the road.
- Asset protection: A corporation can provide a layer of asset protection for your personal assets. If your corporation is sued or files for bankruptcy, your assets will generally be protected from creditors.
- Risk management: A lawyer can help you to identify and mitigate the risks associated with using a corporation to operate your business. This can help you to avoid costly mistakes and to protect your business from financial losses.
- Tax planning: A lawyer can help you structure your corporation to minimize your tax liability. This can save you a significant amount of money over the long term.
- Succession planning: A lawyer can help you to develop a succession plan for your corporation. This can help to ensure that your business continues to operate smoothly after you retire or pass away.
Here are some specific examples of how an expert lawyer from Tabuchi Law can help you protect your assets and real estate using a corporation in Ontario:
- Set up the corporation properly: A lawyer can help you to choose the right type of corporation for your needs and to file the necessary paperwork to incorporate your business.
- Draft corporate documents: A lawyer can draft the necessary corporate documents, such as the articles of incorporation, bylaws, and shareholder agreements.
- Advise on corporate governance: A lawyer can advise you on corporate governance best practices and help you develop corporate policies and procedures.
- Negotiate and draft contracts: A lawyer can help you to negotiate and draft contracts on behalf of your corporation. This can help to protect your interests and avoid costly disputes down the road.
- Represent you in court: If your corporation is sued, a lawyer can represent you and help you defend your interests.
If you are considering using a corporation to protect your assets and real estate in Ontario, I encourage you to consult with an experienced lawyer to discuss your options. They can help you create a comprehensive plan that meets your needs and goals.
