You have goals for your business and you’re ready to take it to the next level. With the right planning, incorporation could be a leap forward.
A lesson on incorporation
Whatever your field of business—agriculture, technology, design, and more—there are many managerial strategies to consider, including incorporation, that can quickly become overwhelming.
The term “incorporation” refers to the legal process of creating a “corporation”. In Canada, a corporation has the same rights and obligations under Canadian law as a human being. Legally separate from its owners and shareholders, a corporation can, through its directors, act in its own name. This might include signing contracts, opening a bank account, or paying salaries to employees.
Zoom in to get a closer look at how to incorporate your business.
Step 1: Choose a jurisdiction
All Canadian entrepreneurs, with a few exceptions, have the option to incorporate federally or provincially.
The jurisdiction you choose will decide how your business will operate and the rules that apply. A company incorporated in Ontario, for instance, is governed by the Ontario Business Corporations Act (OBCA) and set out by its rules and restrictions. Meanwhile, a company incorporated in Quebec is governed by the Quebec Business Corporations Act (QBCA) and subject to a different set of rules and restrictions. A company operating in Quebec, for example, must have a French name and a head office located within the province.
Federal incorporation also comes with its own set of conditions. When incorporating at the federal level, at least 25% of the directors must be Canadian residents.
Step 2: Choose a legal status
While most for-profit companies are incorporated, another legal status might be more appropriate for your business. You can choose to register as a general partnership (GP), a limited partnership (LP), or a joint venture. Some companies are better served as non-profit corporations, cooperatives, associations, or trusts.
Step 3: Choose and register a name
If you decide to incorporate, you’ll need to choose a name for your business—either a numbered company or a word name. Most people prefer a word name to give their company a unique identify.
When choosing a name, you’ll want consider how it will attract customers and help them identify your business. That’s why many entrepreneurs choose a name that’s easy to communicate and remember. Keep in mind that different provinces have different rules and standards to which these names must conform. The Ontario Ministry of Government Services provides a guide to incorporating a business corporation and the Quebec Enterprise Register provide some rules (in French only) to follow carefully before choosing a name.
Lastly, but most importantly, you’ll want to make sure the name you’ve chosen stands out from the crowd. The Ontario Ministry of Government Services offers an integrated business services application where you can compare your name to other businesses registered in Ontario and avoid last-minute panic. It’s called a NUANS search and is required when incorporating a business to be 100% certain your name isn’t being used by someone else. In Quebec, the Enterprise Register offers a similar search tool for you to consult before legally incorporating.
Step 4: Provide documentation
First, some articles of incorporation are required to set out the classes of shares that the corporation is authorized to issue, as well as the rights that come with those shares—like the right to vote, the right to receive dividends, and the right to receive the remaining property of the corporation upon liquidation. These articles limit your ability to carry out business; so, it’s important to pay careful attention at this step. Even when presented with a standard model, you should always seek professional advice from a lawyer or an accountant, as they can assist in the preparation of documentation, especially if the corporation has many shareholders.
Next, the initial declaration needs to be made. This declaration provides standard information about the company, including the field of business and the names of its shareholders and directors.
Finally, all documentation must be submitted upon initial registration, or within 60 days. In Ontario, this includes the NUANS name search report and must be submitted to the Ontario Ministry of Government Services. In Quebec, documents are filed with the Quebec Enterprise Register.
For more information, read the full article on National Bank website.