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Articles tagged with: creditor protection

Aug23

When are you Personally Liable for your Corporation's Debts and Obligations?

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You’ve done your homework, consulted with your accountant and lawyer, and have decided that it is the right time to incorporate your small business. You want to take advantage of some of the main benefits of incorporation: potential tax savings and limited personal liability. This latter benefit is a result of the fact that corporations are considered separate legal persons under the law. This means that they are distinct from their shareholders (i.e., owners), and therefore can shield their shareholders’ personal assets from creditors of the corporation. This corporate separateness is the entrenched rule established in the 1800s to keep shareholders immune from personal liability; it is codified by legislation, such as the Ontario Business Corporations Act (OBCA). As such, the courts are very reluctant to “pierce the corporate veil”; that is, they will rarely look behind the corporation to its shareholders, directors and officers for holding such persons personally liable for the acts of the corporation. However, there are some exceptions created by case law (albeit each requiring a high burden of proof), where a court will deem it just and equitable to pierce the corporate veil. These exceptions should be understood by small business owners who have incorporated their business, as well as by legitimate creditors looking to recover money owed to them.

Nov20

Creditor-Proofing Techniques for Your Incorporated Business

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Whether you’ve built your own business from the ground up or have been tasked with taking over the long-time family business, it would be prudent to ensure the hard-earned assets contained in your business are protected as much as possible from third parties, namely creditors.  Creditor proofing for a business owner means protecting significant business assets from exposure to potential future creditors – that is, from persons who may have legal rights against the business and its property for various reasons (e.g., for money owed). Although the law in Ontario generally prohibits creditor-proofing techniques performed with improper intent, such as those that hinder or impair the rights of existing creditors, it is perfectly acceptable (and highly recommended) to organize your business’ affairs in a way that reduces the risk of the business’ property becoming vulnerable to the claims of future creditors. There are numerous methods of structuring your business to minimize creditor risk that can and should be implemented to safeguard your business’ assets.

Apr10

Passing on the Family Business: Estate and Tax Planning Strategies

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A family owned business would typically involve the parent or parents owning and operating the business, as well as the children or other family members possibly offering a helping hand. The parents may want the next generation to continue the business after the parents' deaths. There are many estate and tax planning strategies to consider when contemplating and executing the succession of a private, family-held business.

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