Did you know that there are various business structures available in Canada? Among the most prevalent types is a corporation, often recognized by the abbreviation “Inc.” appended to its name.
However, understanding the process of incorporation for your brick-and-mortar or online business can feel overwhelming due to the abundance of advice available.
But fear not, this article aims to provide you with all the necessary information on how to incorporate a business in Canada, including its advantages, disadvantages, and the steps involved. Continue reading to gain crucial insights.
Incorporating your business involves establishing a legal entity known as a “corporation.” This creates a separate entity with its own rights and obligations.
In most cases, the law treats a corporation as distinct from its owners, allowing it to conduct activities in its name, such as entering contracts, opening bank accounts, and paying employee salaries.
Ownership of a corporation can be divided among multiple individuals, enabling the distribution of profits through dividends.
While this is a common method of sharing ownership, it’s not the only option available. Incorporation offers several advantages compared to being self-employed as a sole proprietorship, although there may be some drawbacks to consider.
The Canadian legal framework permits corporations to be registered at both federal and provincial levels.
While corporations represent the primary entity type in Canada, there are also other legal structures that can adopt the form of a corporation, including non-resident companies and extra-provincial corporations.
If you’re considering starting a business in Canada and wish to pursue incorporation as your preferred business form, our comprehensive step-by-step guide can assist you.
Establishing a corporation in Canada entails choosing one of the 13 jurisdictions, be it at the provincial or territorial level, or at the federal level.
The responsibility of registering companies lies with the Canada Business Incorporations, the authority issuing registration certificates for firms.
The following is a detailed step-by-step guide to help you navigate the incorporation process successfully.
In Canada, businesses generally have the choice to incorporate either at the federal level or at the provincial level (or within a territory).
Your decision depends on your business plans. If you anticipate conducting business outside your province or territory, federal incorporation might be preferable.
Otherwise, opting for provincial incorporation could be a suitable option.
Here’s a concise overview of federal and provincial/territorial incorporation:
Provincial or Territorial Incorporation
Keep in mind that changing your decision later might result in additional fees and paperwork.
Nonetheless, regardless of your choice, conducting business across Canada and internationally remains possible as long as you comply with relevant legislation and acquire the necessary licenses.
The Canadian government provides a list of authorities responsible for provincial and territorial incorporation.
While most private for-profit companies opt for corporation status, it’s prudent to ensure that no other legal status better suits your business.
Other options include general partnerships (GP), limited partnerships (LP), joint ventures, and, depending on your activities, non-profit organizations, cooperatives, associations, or trusts.
The chosen legal structure may impact tax regulations and liability, making it essential to consider these factors.
The simplest and quickest option involves requesting a numbered name from the provincial or federal authorities during the incorporation process.
This name consists of a unique number, the place of incorporation (e.g., “Canada”), and the abbreviation “Inc.”—commonly known as a numbered corporation.
However, many businesses prefer a word name for marketing purposes, as it is easier for people to remember and pronounce.
Additionally, the chosen name must include a legal element, such as “Inc.” or “ltd.” In some cases, a description of the products or services may be required.
Certain professionals, such as dentists, optometrists, and lawyers, can also include their professional title in the name.
Complying with the rules and standards for company names is essential, and verifying name availability beforehand can prevent last-minute disappointments.
Each jurisdiction has its own paperwork requirements and deadlines.
You may need to provide details such as
While standard templates are available, seeking professional assistance from a lawyer or accountant, especially for multi-shareholder companies, is advisable.
Most documents and relevant professional help can be found online.
Fees for incorporation vary across jurisdictions. Typically, incorporating your business will cost a few hundred dollars.
If you choose federal incorporation, you may also be required to pay fees to the province or territory. Online payment options with credit cards are often available.
Once your application is processed, you will receive the necessary licenses and certificates for your business.
Take the time to verify the accuracy of the information in the business registry and update it if necessary.
Depending on the jurisdiction, you may need to submit additional forms to update your information or renew your registration annually.
After incorporating your company, you and other shareholders must contribute capital to the business by subscribing for shares.
The directors will establish company by-laws, set a head office location, determine the fiscal year’s end date, and appoint officers.
It’s important to recognize that the roles of shareholders, directors, and officers are distinct, even though the same individual may hold multiple positions.
If your company has multiple shareholders, consider creating a shareholder agreement to manage day-to-day operations and make critical decisions.
This agreement should also address contingencies such as shareholder death, disability, or other significant events.
Aside from the limited liability and tax benefits mentioned earlier, incorporating your business offers at least four additional advantages:
Incorporation allows you to sell shares to investors, making it easier to secure investment for your company.
Clients perceive your business as more professional when it is incorporated. Invoices bearing your incorporated business name (with “Inc.”, “Ltd.”, or “Corp.”) signal your commitment to long-term viability and the fulfillment of obligations.
Shares of corporations can be transferred among individuals, simplifying long-term succession planning.
Unlike other business structures, corporations are not limited by the lifespan of their owners. They can exist indefinitely, providing stability and continuity for the business.
The cost of incorporating a business in Canada can vary depending on the jurisdiction and the method you choose.
One option is to use a service like Ownr, where the total cost ranges between $499 and $699, covering government fees, name search fees, company formation documents, and a 12-month subscription to the Ownr platform. This streamlined process offers convenience and savings.
Alternatively, you can directly approach the government for incorporation, and the fees will differ based on your jurisdiction and type of incorporation.
Here are the approximate costs for some provinces:
It’s important to note that government filings completed independently may still require paperwork and additional costs to ensure compliance with business regulations.
Hiring a legal professional is highly recommended to assist with document preparation and compliance.
If you find the compliance process overwhelming, there is an easier way. Consider incorporating with Ownr, where you can avoid additional fees for government filings.
Ownr provides a one-stop solution, including a full year of their Online Minute Book plan, company name registration, company organization documents and share issuances, and access to Ownr Perks.
Incorporating your business in Canada offers numerous benefits and legal protections. By following the step-by-step guide and considering the costs involved, you can make informed decisions and establish a solid foundation for your corporation.
Remember, seeking professional advice when necessary ensures that you comply with regulations and sets your business up for future success.
Make your money do more.
Offers shown here are from third-party advertisers. We are not an agent, representative, or broker of any advertiser, and we don’t endorse or recommend any particular offer. Information is provided by the advertiser and is shown without any representation or warranty from us as to its accuracy or applicability. Each offer is subject to the advertiser’s review, approval, and terms. We receive compensation from companies whose offers are shown here, and that may impact how and where offers appear (and in what order). We don’t include all products or offers out there, but we hope what you see will give you some great options.
Incorporation fees on Ownr range from $499 to $699, varying according to your specific location. This comprehensive package encompasses government charges, expenses related to name search, vital company formation paperwork, and a 12-month subscription to the Ownr platform. Begin the process effortlessly and establish your company promptly through Ownr's streamlined services.