How To Incorporate A Business In Canada: In 7 Easy Steps

To incorporate a business is turning your business into a company recognized by the law. The process has a lot of benefits and is sure to have many advantages, especially in Canada.

When you learn how to incorporate a business in Canada, you are putting it into protection and making it stronger against any hurdle. Incorporation can protect your personal assets, such as your house or car, if your business gets into legal hot water. It can also save you money on taxes.

What is Incorporation?

Incorporation is the process of registering your business as a corporation, which is a type of company that is officially recognized and existing by the law.

• Corporation: An organization considered as a separate entity with its own rights, responsibilities, obligations, and privileges. It can own property, have debts, and make contracts.
• Sole Proprietorship: One individual proprietor owns it, and this person is responsible for all the debts of the business.
• Partnership: A business organization made up of two or more individuals who join to do business together and share personal liability for the business debt.

Benefits of Incorporating Business in Canada:

• The owner is not liable for the debts and lawsuits that may be incurred in the course of business operations.
• The corporation in reality, by all means, can own things, sue, and be sued.
• Corporations often pay taxes at much lower rates compared to individuals.
• This will allow shareholders to defer some part of their taxes in order to allow their business to grow.
• The business continues even if the owner leaves or passes away.

How To Incorporate A Business In Canada

Step 1: Choose a name for your corporation

How to incorporate a business in Canada? First, you’ll have to decide which name your corporation will bear. You have two choices to choose from when deciding the name that your corporation will bear:

• Word Name – This is an exclusive name that you create, such as “Sunshine Toys Inc.” This must not be the name that any other company in Canada is using.
• Numbered Name: This is an easier option where a number is assigned to your company, like “12345678 Canada Inc.” If you wish to have a doing business name, it can still be put.

Name selection is critical, as the name has to be unique. This is because one’s legal identity of the company is attached to it. One has to follow the legal rules attached to it, ensuring no other business uses the same name.

Step 2: Draft the Articles of Incorporation

This is the simpler route wherein most decisions, such as having a single class of shares, are pre-decided for you. Allows choosing everything, with an eye on the needs of your business—including the number of classes of shares, the number of shares in each different class, and allowing for more than one class of non-voting shares. Having more than one director and other officers.

In how to incorporate a business in Canada key elements that should be contained in the articles of your incorporation include:

1. Your business name
2. Your address
3. Share structure is the kind of shares you will have and the right each gives to the shareholders.

You have to decide the number of people on your company’s board of directors.

Step 3: Appoint your first Board of Directors and set up your Registered Office.

For example, if a person incorporates a business in Canada, he will have to set a registered office and a board of directors. This is basically the headquarters of your corporation. This is the place where legal papers and notices are served. It should be an address that important documents reach through it, for it is law; anything sent to the company is considered as delivered.

• Board of Directors: The board of directors is chosen to look after the affairs of your corporation. They make the major decisions on how your business is operated.
• Eligibility of the Directors: There must be some criteria of eligibility for the directors, like the age bar and some legal disqualifications.

Step 4: Registration with Government and Few Other Necessary Steps

How to incorporate a business in Canada? After the establishment of your registered office and board of directors, officially you would register the corporation with the government and likely make some applications for specific licenses.

• Required Registrations and Potential Licenses: In the location where the business is to be carried out, the will or permits have to be obtained for the business to be carried out legally, according to what kind of business is being done and where it is being operated from. It may include a business license, a tax account, or other permits relating to that particular industry.
• Federal or Provincial/Territorial Incorporation: Federal incorporation gives the right to you to continue the business under the same name in all provinces and territories of Canada, though it may require much regulation. You could even look at incorporating provincially or territorially, which can be an easier and cheaper way, but then your business is confined to only that province or territory unless you register somewhere else.

Step 5: Incorporation Document Preparation and Filing

How to incorporate a business in Canada? To make it official—incorporate your business in Canada, you will have to prepare and submit several important documents. Here’s generally what you’ll need:

• Articles of Incorporation: These define the company’s structure, including the kind of shares issued by the company and the structure and number of directors.
• Initial Registered Office Address and First Board of Directors: This form shows the location of your business and who will be running the business.
• NUANS Name Search Report: This shall be required in the event you do not go in for a numbered name and desire to establish that the name opted for by you for your company is unique and not availed by anybody else.

Where and How to File:

You can file these documents online through the Corporations Canada Online Filing Centre if you are incorporating federally, or on the provincial/territorial websites if you are incorporating at that level. Normally, filing online is faster and sometimes easier because it’s possible from anywhere.

Step 6: Pay the necessary fees.

When you incorporate a business in Canada, there are fees payable. The total fee payable will vary depending on if one incorporates at the federal or provincial level.

• Federal Fees: Fees that are collected for federal incorporation are actually for the processing of incorporation, plus the registration fee of your corporation. This is usually a few hundred dollars.
• Provincial Fees: There will be corresponding fees at the provincial or territorial level, usually a bit lower than the federal fees but amounts should be checked for the province or territory where you are incorporating.

Payment Methods:

In most cases, such fees are payable through online means using a credit card, which happens to be the most convenient method. Other forms of payment could include a check or bank transfer, depending on the jurisdiction. Check on the website at which you will file the articles of incorporation what kind of payment is acceptable.

Step 7: Finalise your Internal Corporate Structure

How to incorporate a business in Canada? After the business is officially incorporated, the internal structure will have to be put in place for a smooth operation.

Setting Up Internal By-Laws: By-laws are rules setting out the internal governance of the corporation. Among other things, it deals with the election of directors and conduct of meetings and the powers of directors and officers. Draft the bylaws to suit the specific needs of your corporation.

Shareholders’ agreements: These are agreements entered into between the shareholders of the company. It sets forth the rights and duties of shareholders, including matters regarding the purchase and sale of shares, apart from determining what happens on occasions such as the death of a shareholder or if anyone would like to leave the company. These agreements are quite important in that they restrict conflicts within the company and also provide some kind of guidance on the modality of making critical decisions.

What Next: Incorporation

These are ongoing responsibilities. In order to keep your corporation of business in Canada in good standing, you will need to:

• Annual Filings: Generally, annual filing is required by the corporation with the government in most jurisdictions. Usually, this means giving the government an update of the activities of the corporation and changes to the directors or the registered office address.
• Maintenance of Records: Corporations are expected to keep full records on the conduct of their business, including those of their meeting minutes, finance records, and agreements that exist between them and other parties. Such records are supposed to be open for scrutiny to the relevant authorities.
• Changes and updates to corporate information. If any significant change within your corporation occurs, such as a new director or a new registered office, or any important change related to share structure, you need to file appropriate documents with the government to update your corporate information. This way, everything will be kept legal and transparent.

Conclusion

How to incorporate a business in Canada is one of the most strategic decisions you can make, offering significant legal protections, tax advantages, and a robust organizational structure. Incorporating a business in Canada guides you through crucial steps from selecting a distinctive name to drafting your articles of incorporation, and establishing your internal corporate framework. While it involves detailed attention and ongoing management, the enduring benefits of incorporation substantially outweigh these demands.

Frequently Asked Questions