Unlimited Liability Corporation (ULC)
Candlefocus EditorULCs are often used for businesses or investment activities requiring multiple members. They can also be used for estate purposes. While all shareholders possess the same components of a regular corporation, including limited liability, a separate legal entity, and income tax advantages, their assets remain unprotected from creditors if the corporation is sued.
ULCs are usually set up with two or more shareholders, who can be individuals, corporations, or other entities such as trusts. The shareholders appoint directors to manage the company. All shareholders have joint and several liability, which means each individual shareholder can be liable for all of the corporation’s debt and losses.
ULCs offer a unique form of ownership in Canada. The primary benefit of ULCs is their hybrid form of protection, offering the advantages of both corporations and LLCs. Income tax filings are the same as those for corporations, including the filing of separate income tax returns.
ULCs also offer members greater flexibility, as the rules governing them are less restrictive than those for corporations. ULCs require minimal formalities for day-to-day operations, and are also less expensive to establish and maintain than a corporation. Additionally, ULCs can have perpetual existence, meaning they have no limits on the duration of their existence.
ULCs are an attractive option for entrepreneurs and investors looking for a flexible business structure. They can be useful when establishing an international company, or to protect personal assets from creditors. However, it is important to review the advantages and disadvantages of ULCs with an accountant or lawyer before incorporating.