Why Incorporate?

Protection against liabilities. A corporation is a separate legal entity distinct from its shareholders. The owners of a corporation (known as its shareholders) are not personally liable for the debts and obligations of the corporation. Therefore, the shareholders have what is known as limited liability; they cannot be liable for more than they have put into the corporation. For example, if a creditor is owed money by the corporation they cannot generally go after the shareholders for amounts owed. A corporation as a separate legal entity also never ceases to exist unless it is dissolved; it can exist indefinitely.

Creating Tax Efficiencies. A corporation may also provide certain taxation advantages including a lower corporate tax rate (especially for small businesses) than your personal tax rate (depending on your income). You can keep the profits you earn in a corporation, which may help with tax planning, and you have control over the distribution of profits to better suite your circumstances

Named Company or a Doing Business as Name?

Generally, it is best to name your company upon incorporation; it is the most cost-effective time to do so. Sometimes people incorporate a numbered company (e.g. 12345678 Ontario Ltd.) and then think of a name for their business.

Some people prefer to have a numbered company and a “doing business as” (d.b.a.) name which is basically a license to use a name that is not your official corporate name. This license is called a “master business license” and expires 5 years from the date it is issued. This means that you need to obtain the license for $60 and every 5 years after that you have to spend about $60 to renew it. In the long run its less expensive to name your company from incorporation.

It is easier to incorporated a named company in Ontario (as opposed to a Canadian incorporation – known as a Federal incorporation); in Ontario, the burden of have a name that is not the same as another entity is on the incorporator whereas under a federal incorporation Industry Canada reviews your name and can reject it. See Federal vs. Ontario Incorporations.

Ltd., Inc. and Corp. What’s the Difference?

There is no difference in the meaning of the legal ending of a corporation; an Ontario or Federal corporation must have in its legal name any one of the following: Ltd., Limited, Corporation, Corp., Incorporated or Inc. Usually the legal identifier is at the end of the corporations name (e.g. ABC Limited), but it need not be. All of these words signify that the corporation has limited liability. You can choose a legal ending that fits best with your corporate name.

Federal vs. Ontario Incorporations

Naming the Company: Both Ontario and Federal corporations are prohibited from using names that are the same or similar to that of any known corporation, association, trade-mark, partnership or individual, whether or not currently in existence, if the use of the name would be likely to deceive the public. There are also a list of prohibited names (such as profanities, names similar to government entities, etc.). Unlike a federal incorporation, the Ontario government does not make decisions on corporate names and does not reject names for business corporations unless the proposed name is identical to that of another corporation appearing on the NUANS name search report. Industry Canada reserves the right to reject any proposed name for a federal corporation that contravenes the federal name policy. Industry Canada will review the names of corporations, associations, trade-marks, partnerships and business name registrations throughout Canada – not just in Ontario. If your federal corporate name is approved, the corporate name may be afforded greater protection across Canada and will entitle the corporation to use that name in other provinces. If there is a specific name you really want we encourage you to create an Ontario corporation or have us conduct a Federal name pre-approval.

Doing Business Nationally: Ontario or Federal incorporations are both allowed to carry on business in any province of Canada; both types will be required to comply with applicable registration or licensing requirements in the relevant provinces or territories. A federal corporation has the right to carry on business under its corporate name throughout Canada. When an Ontario corporation wishes to operate in a different province it must conduct a name search in each province or territory in which it wishes to operate in.

Privacy Concerns. Federal corporations post certain information about the company and its directors online for the public to view – see https://www.ic.gc.ca/app/scr/cc/CorporationsCanada/fdrlCrpSrch.html. This information is also available to purchase for an Ontario corporation but it is not freely available online.

Do I need an HST number?

It is always best to speak with your accountant about your business circumstance. However, if you are incorporating to operate a business (as opposed to creating a holding company that holds assets – like shares or real estate) and you anticipate to have sales over $30,000, we recommend that you obtain your HST number shortly after incorporation. Yes, you will have to commence HST filing and withholding but you will also be able to deduct HST that relates to your input tax credits (please contact your accountant or tax adviser to determine the best course of action for your business).

If you want do get your HST number check out this link to the CRA website – click here.

Do I need to be Canadian to incorporate a company?

No you don’t need to be Canadian to incorporate an Ontario or Federal company, however, you need to have at lease 25% of the directors be resident Canadians. A “resident Canadian” is generally: (a) a Canadian citizen ordinarily resident in Canada; (b) a Canadian citizen not ordinarily resident in Canada who is a member of a prescribed class of persons, or; (c) a permanent resident.

If you don’t have a resident Canadian director we can have your incorporation established in British Columbia where there are no residency requirements.

Liability in Professional Corporations.

Professional corporation shareholders should also note that the OBCA specifically removes limited liability for acts of the professional – e.g. negligence or errors and omissions claims of clients. Other limitations on liability that corporations enjoy are still available to professional corporations – such as creditor protection.

Do I need a corporate seal?

No, a corporation is no longer required to have a seal by law. Don’t waste your money buying one. Why spend $60+ on something you aren’t required to have and will likely never use.

What is NUANS Search

A NUANS (an acronym for “new updated automated name search”) is a computer generated report that searches your proposed business name against a list of all corporate names and trade-marks in Canada. A NUANS search is required when submitting articles of incorporation for a named corporation. If you are incorporating a named company, we will obtain the NUANS for you. A NUANS acts as a reservation for your preferred name but a NUANS is only valid for 90 days. After 90 days, you must order a new NUANS search

Why do I need a minute book?

A minute book is in essence a binder that keeps all corporate records of the corporation. There are requirements in both the Ontario Business Corporations Act and the Canada Business Corporations Act to keep a proper set of records which includes articles and by-laws and all amendments to them, any shareholders’ agreements, minutes of meetings and resolutions of shareholders and directors, a securities register, and notices of directors and changes in the board of directors. It is an offence not to  keep adequate records and maintain them annually.

We offer both physical minute books or virtual digital minute books. We can maintain both annual for you to ensure that your records are up-to-date and you are in compliance with the Ontario Business Corporations Act and the Canada Business Corporations Act.

What is a share certificates and what are classes of shares?

When incorporating a company the articles of incorporation will detail the classes of shares issuable by the corporation. A class of share details the entitlement of the holder to dividends, profits, assets upon dissolution or voting rights.

A share certificate is evidence of ownership to a number of shares of a particular class in the corporation.

A basic incorporation will have one class of shares designated as “common shares”; each common share shall entitle the holder to one vote per share at any meetings and will entitle the holder to a dividend (if any are declared by the board of directors) and a right to the assets of the corporation upon dissolution of the corporation; all in proportion to their ownership in the corporation.

For maximum flexibility, we recommend having multiple share classes (e.g. common shares, preference shares). This will allow to you have different shareholders with different rights in the corporation. Sometimes you may want to be the only voting shareholder for maximum control. Sometimes you may want to have different people holding different classes of shares to distribute profits by dividend more efficiently and for better tax plan purposes.

What if I want to do business in another province?

Whether you have incorporated federally or in Ontario, if you wish to setup a presence in another province and do business you need to register in that province. Usually this is by way of an “extra-provincial registration” which gives you a license to conduct business in that province. There are varying fees per province and each registration will last a certain number of years before you have to renew it and pay additional fees.

What are the yearly costs of upkeep

A federal incorporation has an annual filing fee of $20 (if done online); an Ontario corporation has no annual filing fee.

However, there are also the cost of conducting your annual resolutions (i.e. reappointing your directors, appointing your accountant and waiving the requirement to conduct an annual audit). We can keep your minute book up to date and prepare these annual resolutions for $75 per year on an annual plan or $100 per year if you need to have the created individually later on.

What do I need to open a corporate bank account?

When opening a bank account for your business, you will need to provide the bank with the certificate and articles of incorporation. We provide this to you digitally after your incorporation is complete.

What is an Ontario Form 1 – Initial Return/Notice of Change or a Federal Form 6- Changes Regarding Directors?

An Ontario Form 1 – Initial Return/Notice of Change is a document that must be filed for every Ontario corporation within 60 days of incorporation or within 15 days of the change of information within a previously filed Form 1.

The Form 1 sets out the registered address of the corporation as well as a list of all officers and directors (when they were appointed and when they were removed).

A Form 1 can be filed by mail at no fee or filed electronically with a fee. If you file by mail it can take up to 25 days to process once it is received by the Ontario government. If you fill online the information is update immediately.

For those who wish to open a bank account right away we highly recommend the electronic filing of a Form 1 so that the bank has the necessary info they need to open your account.

Federal Form 6s are filed online only for no fee.

What are some of the requirements for Professional Corporations?

Sections 3.1-3.4 of the Ontario Business Corporations Act (the “Act”) sets out the requirements for profession corporations. Specifically, professional corporations for CPAs must comply with the following:

  1. All of the issued and outstanding shares of the corporation shall be legally and beneficially owned, directly or indirectly, by one or more members of the same profession.
  2. All officers and directors of the corporation shall be shareholders of the corporation.
  3. The name of the corporation shall include the words “Professional Corporation” or “société professionnelle” and shall comply with the rules respecting the names of professional corporations set out in the regulations and with the rules respecting names set out in the regulations or by-laws made under the Act governing the profession.
  4. The corporation shall not have a number name.
  5. The articles of incorporation of a professional corporation shall provide that the corporation may not carry on a business other than the practice of the profession but this paragraph shall not be construed to prevent the corporation from carrying on activities related to or ancillary to the practice of the profession, including the investment of surplus funds earned by the corporation.

There are exceptions to this specifically for doctors and dentists.