Incorporating your business makes a legal entity with rights and obligations, and the corporation considers to be a separate entity from the individual. Whether you are just planning or already operating a business through sole proprietorship or partnership structure, incorporation is an option worth considering. You can choose to incorporate your business federally or provincially, and it will bring numbers of aspects as well as your personal goals and comfort levels.
Advantages
- Limited liability
- Ownership is transferable easily
- Lower corporate tax rates
- Better access to capital and grants
- Continuous existence
- Separate legal entity
- Unlimited life
Are you ready to get started? Here’s the easy step-by-step guide to incorporate your business.
Choosing Jurisdiction between federal and Provincial Incorporation
Businesses that wish to incorporate, has option to choose between Federal or the Provincial Incorporation. Both Federal and Provincial corporations have a number of the same benefits. However, there are some differences between the two jurisdictions. The primary differences between these two methods are:
- Government fees
- Name protection limit
- Requirements of name approval
- Requirements of Extra Provincial registration
- Filing maintenance
Provincial corporations preserve more confidentiality compared to a federal corporation. A federal company’s information such as business name, office address, directors, annual filings are publicly available online whereas inquiries against a provincial corporation require to pay a third-party service charge to get a search report.
Choosing a Named or Numbered company
After selecting the jurisdiction, you need to choose the business name either a named or numbered company. There are no legal differences between a distinctive named or a numbered corporation, both companies offer same liabilities and tax advantages. A ‘numbered company’ is a business corporation that can be incorporated using number without choosing any unique and descriptive name, e.g. 1234567 Ontario Inc. If you are thinking of developing and growing your business into a recognizable brand, it would be beneficial to have a Named corporation. A name search or NUANS report is required for named corporation. The report thoroughly reviews your proposed business name which must be distinct and reasonably different from the existing corporations within the jurisdiction.
A corporate name is established with three elements: Distinctive element which is the unique identifier and promotes branding of your company name. Descriptive element which describes nature of your business (Not absolutely required). Legal element which refers to one of the permitted legal endings. The ending has no legal substances and distinctive/ Descriptive elements can be more than one word.
For Example:
[Distinctive] + [Descriptive] + [Legal Ending]
Premium Bakery Ltd.
Filing Articles of Incorporation
Articles of incorporation is the set of formal documents filed with incorporator’s desired jurisdiction in Canada to establish a business. Once a business completes all required steps without any inaccuracies, an official Articles of Incorporation will be issued by the appropriate government department.
Extra Provincial Registration
Extra-provincial registration means obtaining a certificate from the provincial Government and/or filing any other required information that is incorporated in Canada which wishes to carry on business in another province or territory other than the province or territory in which it is incorporated. Additionally, if you are incorporating your business federally, you will need to register in the provinces or territories where you plan to do the business as well it’s registered office address is located.
Additional Requirements
There are few others paperwork needs to be done by jurisdiction requirements. The following information may need to provide within a limited time depend on the jurisdiction you are incorporating the business:
- Complete the By-Laws
- Initial return filing
- Share issuance to shareholders
- Directors election
- Appoint Corporate officers
Different positions in a Corporation
All Corporation must have three types of positions at the time of incorporating. One person may hold all these positions.
Shareholders: Shareholders are the legal owners of the corporation. Shareholders can be individuals or other corporations, but every corporation must have at least one shareholder who has voting rights, the right to receive dividends, and the right to receive any remaining assets from the corporation upon dissolution. In many small corporations the sole shareholder is also the corporation’s sole director and officer.
Directors: Directors are individuals elected by a corporation’s shareholder(s) to manage the corporation. All corporations must have a minimum One (1) director, and must be at least 18 years old, an individual (physical persons), not mentally incompetent person and not be in bankrupt status. At least 25% of the directors must be Canadian permanent resident.
Officers: Officers are individuals appointed by the corporation’s director(s) to manage the daily affairs of the company. Officers commonly assume senior management titles such as President, Treasurer, Secretary etc. A single officer can hold more than one position. All corporations must have a President and Secretary, however both positions can be held by the same person and the person can also be directors and shareholders.
CRA Program Account Registration
Certain business activities require a unique 9-digit business number after incorporation when any of the following most common Canada Revenue Agency (CRA) program accounts are required to register:
- GST/HST (RT) if your business collects GST/HST
- Payroll deductions (RP) if your business pays employees
- Corporation income tax (RC) if your business is incorporated
- Import-export (RM) if your business imports goods or sells goods or services abroad
Open a Business Bank Account
Opening a business account is one of the first steps on your business journey. The following documents will be required to present to open a Business bank account in Canada:
- Articles of incorporation
- Trade name registration, if applicable.
- One piece of original, valid and current government-issued photo ID.
- Name, address and occupation of all those owning at least 25% of your business.
You should research the services, fees and features before you decide which bank to open an account that matches your transaction needs and budget.
Permanent responsibilities
Every Corporation is responsible to maintain certain documents and records. You are expected to keep your corporation up-to-date when circumstances change, including:
- Filing an annual return: Filing an annual return for a business corporation provides up-to-date information to Corporations Canada.
- Filing a change of registered office address: Your registered office address is the official address for communications with your corporation.
- Filing changes regarding directors: Interested stakeholders have a right to know who the current directors are and where they can be reached.
- Amending your articles: Your articles set out basic information about your corporation.
- Corporate Minute book and share records: A corporate minute book stores all of your legal records, including the articles of incorporation, the minutes of shareholders and directors’ meetings, share certificates, tax filing, by-laws and other documents. It is required by-law to maintain an updated minute book once you have filed for incorporation, failing can impose a fine.
Incorporate Your Business Now
Legal Smart helps thousands of entrepreneurs every year to bring their dreams come true. Our experienced professionals reduce the paperwork, file and form your business to incorporate. If you have any questions about incorporating your business, email us at info@legalsmart.ca.
