The incorporation process, what you should know in your first year.

You have one way or another decided that the route you’re going to take in your business entity is incorporation. Maybe it was because you have the opportunity to take advantage of the tax benefits, or because you like the idea of limited liability. Whichever the reason, you know you want to incorporate, so you do what anyone else would do and you google “Incorporate a business in Canada”.

From the search you will find various links to different guides on ownership structures, federal vs provincial registration, advertisements from legal services to complete the registration, and maybe some benefits of being in a corporation. Looking at the first few results that came back, this article from Shopify to me is a good compilation of some of the relevant information needed to get a good background on incorporating.

In my case, I registered in Ontario due to the fact that I won’t be creating multiple locations or really working outside of Ontario at all. The simplicity and cost made sense for me. From here you have the option of finding the correct paperwork, putting it together and filing the incorporation, or using a legal incorporation service. To me an incorporation service provider always ends up being worth it for the simplicity and streamlined filings at a low cost. This is the website I have used for incorporations. For the majority of small businesses incorporating on your own is a tough, but possible, task. Usually articles of incorporation and their share structures are simple and there is only one officer and director. However generally it would be in the owners’ best interest to speak with a professional to provide some guidance. This usually results in cost savings in the long-term as amending the articles can cost money, and some elections/amendments cannot be back dated.

The first step is to determine if you want to have a named Corporation or a numbered Corporation. Each Corporation is automatically assigned a corporate number, so it is not necessary to do anything if you prefer to have a numbered Corporation. If you would like to have a named Corporation, you must first do a name search in the jurisdiction you have chosen (federal or provincial) using the NUANS search engine. Keep in mind that whichever name you choose, it must follow certain rules, listed here. Note that you will have to use a legal corporate ending in the name (ex. Inc., Corp., etc.). This will provide you with a list of Corporations with similarities to your selected name, and a report stating whether it is usable or not for your Corporation.

Now that you have your articles of incorporation in hand, what’s next? Well, you have a few things you have to do (assuming you want to stay current with the required filings). First, you have to file an initial return, which is free if mailed in, found here.

The next step is to determine which provinces you will be operating within. If you have incorporated in Ontario, you will already be registered to operate in Ontario and will have an Ontario Corporate Number (OCN). If you incorporated federally, you will have the option of choosing certain provinces to register within that are free initially. Whether you have incorporated federally or provincially, you will need to determine which provinces you will be operating within, and register with those provinces by filling out the appropriate forms on each provinces government Corporations website.

The final step is to create a Minute Book for your Corporation. This is a binder, physical or digital, containing all the documents pertaining to your Corporation. It includes information for yourself and others on aspects of the business, like who the directors, officers, and shareholders of the Corporation are, and it can also hold the physical shares of the Corporation. It is important to have this information and to keep it up to date, as the bank or auditors may request to see it or certain documents from it.

The minute book requires, each year, that annual resolutions are completed after each financial year to confirm the current directors, officers, financial year end, bank, accountant, and other information of the Corporation. Should you miss a year, do not worry! You can always make up for it the next year. Just remember to record any decisions of the business that the Corporation has made within the minute book. This is also a good time to revisit and re-register any provincial registrations you may have.

Now that you have completed the incorporation process the next step is looking at getting a bank account, and getting set up with the Canada Revenue Agency. Luckily you have already been assigned a Business number automatically with your incorporation so naturally the next post will be about what you need to know to stay compliant with CRA.

As always feel free to reach out to me if you have any questions or want to talk a bit more specifically about your business.

Also if you haven't read my introduction post please do (Blog Introduction Post).

-          Erik