"I get these calls every day," she says: "'I'm a sole proprietor. I've heard I should incorporate, how do I know if I should?'"

The simple answer to whether it makes financial sense is, she says, that it depends.

"There are two things to consider: your liability and risk, and are you looking to sell your business down the road," she says.

According to Industry Canada's Guide to Federal Incorporation, "the act of incorporation limits the liability of a company's owners or shareholders."

Incorporation sets up a legal entity itself, separate from the owners, Fernandes explains, which serves to distance the two.

"A creditor cannot sue shareholders for liabilities (debts) incurred by the corporation, even though shareholders are owners of the corporation," states the guide. "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)."

The guide does note, however, that if a "shareholder has another relationship with the corporation, for example, as a director, then he or she in certain circumstances may be liable for the debts or liabilities of the corporation in that capacity."

Because incorporation in not mandatory, and can add to the start-up costs of a new business, many entrepreneurs decide to wait until cash flow improves. However, taking this step may be an important consideration for companies even from the beginning, says Fernandes. This is especially true if they are operating in a particularly litigious environment.

She recalls starting up her original business in the early 1990s and the process she experienced.

Provincial Vehicle Transfer (PVT), a transportation logistics company, assists clients with such things as truck delivery, incorporations and small-claims issues, she explains. Within a year, PVT was registering sales in excess of $500,000.

When she and a colleague decided to start PVT as a joint venture, she sought advice from her accountant, who recommended incorporation because of the liability risk involved in her industry.

"If one of my drivers had an accident with a client's vehicle, or something else happened, I could otherwise be facing the risk of personal liability," she says.

Consequently, she sought out a lawyer and had the documents drawn up.

She soon discovered she could have done it herself for a fraction of the price and researched the process in-depth. This effort soon paid off as she began to repeat the process for her clients.

Seven years later, when she decided to sell PVT to her partner, the incorporation served to make PVT a more tangible entity that could have a valuation and be sold.

That's when she decided to formalize her paralegal training and open Fernandes Paralegal Services.

Business owners who call her company to inquire about the pros and cons of incorporation are not only advised of those options, they are also told there are several ways to proceed if that route is chosen.

Individuals can choose to do the paperwork themselves, ideally in conjunction with their accountant, she says, and the cost is limited to ministry fees. Alternately, a paralegal, lawyer or other experienced third party can advise or complete the process.

For more information on incorporation, please call

paralegal Crestenna Fernandes at 705-424-6714