Are you ready to incorporate your small business?
By incorporating your business, it will become a new legal entity, called a corporation. Learn about the Pros and Cons of Incorporation if you’re not sure whether you want to take the leap. Do you value limited liability protection, potential tax deferrals and savings, as well as the ability to raise funds? Can you tough it out if a lender won’t give you credit? Will you be able to afford the ongoing costs and complications that running a corporation brings? If you already know that the opportunities outweigh the obstacles for your business situation, then read on for how to incorporate a business in Canada.
Once you’ve settled on your top two or three name choices, a NUANS report will show you a listing of trademarked or incorporated businesses that have similar names to the corporation that you’re starting. It’s an opportunity for you to ensure your business name is distinct enough for you to operate without concern. Ownr (our discount in the link) lets you search up to 30 names before ordering a NUANS, so you can do a thorough search of businesses in the jurisdiction you’re registering your business. If you want to incorporate your company in Ontario, New Brunswick, Alberta, PEI, Nova Scotia or if you’re incorporating federally, then a NUANS report is required. It will be valid for 90 days from the date you first order the report. You’ll need to finish registering or incorporating your business within those 90 before the names on the report are no longer valid.
Register Federally or Provincially
Do you want to incorporate your company at the federal level or at the provincial/territory level? If you think you’ll be doing business outside your province, federal incorporation might be the right choice for you, even though it’s less expensive upfront, it takes more work to set up and maintain in the long run. If your business is and plans to be operating primarily within one province, incorporating on the provincial level is a fitting option. If you would like to do business in another province, you can apply to that provincial government for extra-provincial registration, which would allow you to operate in more than one province or territory at a time.
Many a busy person has not even considered the jurisdiction, never mind a corporate name, as they have rushed straight to Corporations Canada to pay $200 to DIY online registration for basic incorporation.
A “simple and fast” pre-packaged incorporation option includes:
- an assigned, numbered corporate name
- pre-determined articles of incorporation, about 3-4 pages long
- one or two classes of shares
- set number of directors
- a business number from the CRA, so you can open business bank account
You can make amendments if you need to redo articles or rejig the share structure, adding restrictions on share transfers or ownership of shares. Of course, there’s a price if you’re adding complexity, so you want to get it right the first time. An experienced accountant can give you the strategic guidance you need for the right corporate structure based on your particular situation.
Here’s what you’re missing when you pay $200 to DIY incorporation and don’t include an accountant from the get-go:
Digital Minute Books
A traditional corporate minute book is a large loose-leaf binder that stores all-important corporate documents such as the articles of incorporation, stock certificates, by-laws, annual meeting minutes, tax filings, and other legal documents. Unfortunately, too many physical minute book binders have been misplaced, lost, stolen or destroyed due to fires or floods.
Thanks to cloud computing, electronic signatures, and a special resolution, a tech-savvy accountant can easily maintain your corporate records in digital form. A secure online version can be backed up, kept safe, and easily accessed.
An experienced accountant or lawyer can help you establish and organize corporate by-laws to lay out the day-to-day operating rules and procedures for your new corporation, adeptly using bylaws (investors, multiple owners, classes of owners) to lay a strong foundation for your company to grow. These by-laws may include how business affairs are to be handled, duties of the managers and owners, annual meeting standards, rules and obligations for shareholders/officers/directors, the removal process of officers/directors, the stock issuance process, and more.
Shareholders elect directors at the shareholders’ meeting by a majority of votes. The directors are responsible for appointing officers. Officers are responsible for the day-to-day operations of the corporation. With the directors, the officers will form the management of the corporation. An individual can be the sole shareholder, director and officer of a corporation.
Your (board of) directors will decide on bylaws to help oversee its operations over the life of the corporation. They can make rules limiting the modifications that can be made to the powers given to corporate directors. A by-law could state how many votes are needed for consensus (quorum) so one director can’t vote another out. Don’t underestimate how messy things may get later on, which is why your lawyer will guide you through the development of a Unanimous Shareholder Agreement. This agreement contains provisions in decision making and share transfers, both of which are very helpful in the case of a deadlock or a bankruptcy or the unexpected death of a shareholder.
There’s so much to cover about how to incorporate a business in Canada. A name search to zero in on an available corporate name, deciding whether to register federally or provincially, the safety and availability of digital minute books, as well as making by-laws to establish and organize your day-to-day operations. There’s so much to cover, in fact, that we have a Part 2. In it, we examine shares and shareholder agreements, annual findings, annual returns, annual general meetings, along with GST/HST and payroll returns. If you need some professional advice, contact us to discuss setting up a Canadian-controlled private corporation.