Planning to start your dream project?
I can guide you through the various stages that you will have to walk through to get your business incorporated.
I am sure you have planned and researched about incorporating a business. It is critical to keep in mind that there is not turning back from this point.
When incorporating a company in Canada there’s many points to consider. Incorporating a company has its own benefits and drawbacks.
Let’s learn your business would be different once it is incorporated
Incorporating creates a new and separate legal entity for your business, shielding your personal assets and providing a more formal business structure. The company would be seen as a separate legal identity, which means it will have the same rights and obligations under Canadian law.
The entity will be capable of acquiring assets, obtaining losses, entering into contracts, can sue or be sued and even be found guilty of committing a crime.
The entity's assets and liabilities belong to the corporation which is separate from its shareholders personal assets and liabilities. Incorporation limits the liability of the corporation's shareholders to the amount of their investment. Under unfortunate circumstances, the entity can declare bankruptcy, the shareholders of the business don't lose any more than their investment. The shareholders cannot be sued by creditors for repayment of the business' debts.
So what are the initial steps to incorporate a company?
Finally, you need to decide whether you wish to incorporate your business as a provincial corporation or federal corporation.
A provincial corporation is required to carry out its commercial activities with the provincial jurisdiction in which it was incorporated.
Whereas a federal corporation can carry its commercial activities anywhere in Canada irrespective of the province. It also offers the entity protection from having its name used by any other company in any other province. But it is recommended to file a trademark with CIPO (Canadian INtellectual Property Office) to retain the full rights.
Once you have considered all the factors and made up your mind on going for a provincial or federal corporation, you need to register with the department of your province that handles the incorporation of a company.
Are you excited to give it a name?
Now the next step is to choose a name for your company.
Name selection can be a little stressful! But can always incorporate a numbered company (for example: 12345678 Canada. Inc) and can choose a name later.
Every entrepreneur is excited to name their company and have it legally registered but there are few more things to consider before naming your company.
You need to conduct a NUANS name search to ensure that your desired business name is available.
You might be wondering what NUANS report is? A NUANS report is a list of existing corporate and business names, as well as trademarks, that are similar to your proposed business name. This report helps you avoid selecting a name that is already in use.
It is mandatory to have NUANS report while registering for a federal corporation in Canada.
It’s time for Registration
Once the name is selected, you will need to file the initial registration forms with the government.
In order to proceed further with the registration, you will need to determine the share class structure along with the company’s initial directors.
If you choose to incorporate a provincial corporation, you will have to consider the provincial requirements by the respective province. Make sure to research into the requirements to avoid missing out on any crucial step.
You are half-way through the incorporation process after filing the documentation with the provincial or federal corporate registry.
For you to get the other half of the incorporation process, you will need to create and sign all of your company formation documents such as Corporate Bylaws, Shareholders and Director Resolutions, Director Consents, Share Subscriptions and Share Issuances.
Let’s share some knowledge about share and constitution of a corporation
A corporation has three major roles which are Shareholders, Directors and Officers.
It is common to have one individual as shareholder, director and officer in a small company.
A shareholder is a person that owns the shares of the company. A unit of ownership is called a share.
Shareholders are legally separate from the company. As a result, shareholders are generally not liable for the debts of a company (unless a shareholder has signed a personal guarantee on behalf of the company)
A director is overall responsible to oversee the company’s activities and strategies. They are collectively called the Board of Directors. A director is appointed by the shareholder(s) of the company.
Officers actively operate and manage the company. A company can have several different officer positions to cater the needs of its business. Common examples of officers titles include President, Secretary, CEO, Vice President and Treasurer. These positions can be held by a single individual. These positions are appointed by the board of directors.
Let's get back to the Shares, the number of shares owned by each shareholder reflects the proportion of the company they own.
But that doesn’t mean that all shareholders hold an equal share. While incorporating the company, multiple classes of shares can be created to allow different groups of shareholders to enjoy different sets of rights and privileges over the company.
Once the company is incorporated, the corporation is obligated to maintain a certain set of documents and records. These documents and other records are to be maintained in an organized manner and made available as and when required.
In exchange for the tax and legal benefits of incorporation, it is expected of you to keep the corporation up to date and in compliance with the law.
In case of any company detail changes (for example: when a new director is appointed or change in your registered address), you have an obligation to file forms with the government and prepare corporate resolutions which officially approve the company changes.
The company is responsible for filing an annual return with the government and paying the associated fees as well as to prepare annual shareholder and director resolutions. These are important documents in order to keep the company in compliance with the law.
In case of missing out on filing the annual return, the government has the power to dissolve the company.
It is going to be a major step for you and your company. Make sure you follow all the steps to avoid any negative effect on your company and dealing with the government due to any non-compliance. Many entrepreneurs miss out on the necessary steps due to lack of time which later costs them their company.
If you are unsure regarding how to go about the process of incorporation by yourself, look for an organization that will help you get through the process without missing out on any steps.
After incorporating your business, there are many other checkpoints to look at. Be posted and I will get back to you with all those checkpoints.
At BHTAX CPA, we are here for you to attend all your about tax and accounting issues. Contact us now and lets discuss about all your business needs. Our range of services is meant to help you start, grow and retain most of the cash in your business. BHTAX CPA is an accounting firm specializing in Small Business Bookkeeping & Tax Planning.
Located in Beautiful Forest City of London and Serving all of Ontario virtually.
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