If you’re starting a business, one of the first big questions you need to answer is business legal structure. In this article, we outline the steps needed to incorporate in Canada.
If you’ve read the blog post on the different types of legal structures, you know the difference between sole proprietorship, partnership, and corporation. If you don’t know the difference, you can read the article, then come back once you’re certain incorporating is the best route for you.
Incorporating a business in Canada is an important step towards establishing a legally recognized and separate entity. It offers various advantages such as limited liability protection and potential tax benefits. This article will walk you through the process of incorporating a business in Canada, highlighting key steps and considerations along the way.
Step 1: Choose a Business Name
Selecting a unique and distinguishable name is crucial for your business. Ensure that the name aligns with your brand and accurately represents your products or services. Conduct a thorough search to confirm that your chosen name is not already in use by another entity. You can check the Canadian trademark database and the database of the provincial or territorial corporate registries for availability. Our Business Name Brainstorm worksheet can help you through this process. You can also read this blog post.
Step 2: Determine the Jurisdiction and Business Structure
Decide on the jurisdiction and business structure that best suits your needs. Most commonly, businesses in Canada are incorporated at the provincial/territorial level. However, if you plan to operate nationwide, you can choose to incorporate federally. Research and understand the differences between provincial and federal incorporation, considering factors such as reporting requirements, costs, and the ability to conduct business outside your chosen jurisdiction.
Additionally, determine the most suitable business structure for your venture. The three main types are sole proprietorship, partnership, and corporation. Each has its own advantages and considerations. Consult with legal and financial professionals to determine the best structure for your specific circumstances.
Step 3: Prepare Incorporation Documents
Next, you’ll need to prepare the necessary incorporation documents. These typically include the articles of incorporation, which outline the company’s structure, purpose, and rules. The specific requirements may vary depending on the jurisdiction and business type.
Key information to include in the articles of incorporation:
- Business name and address
- Names and addresses of directors and officers
- Share structure (for corporations)
- Any special provisions or restrictions
Consult a lawyer or use online legal services like Ownr to assist with drafting and reviewing these documents to ensure compliance with the relevant laws and regulations. Use this link to get a 15% discount.
Step 4: Register with the Government
To officially incorporate your business, you’ll need to register with the appropriate government agency. If you’ve chosen federal incorporation, you’ll register with the federal agency, Corporations Canada. For provincial/territorial incorporation, you’ll register with the respective provincial or territorial corporate registry. A lawyer or online legal services like Ownr will provide the guidance you need to ensure you’re complying with the necessary steps.
If you’re not sure whether you want to incorporate federally or provincially, read this blog post that explains the difference. It also includes the links you’ll need to register.
File the necessary incorporation documents, pay the required fees, and submit any additional forms or declarations as required. It’s important to carefully review the registration requirements and follow the instructions provided by the government agency to avoid delays or rejections.
Step 5: Obtain Business Permits and Licenses
Depending on your industry and location, you may need to obtain specific permits and licenses to operate legally. Research the federal, provincial, and municipal requirements that apply to your business activities. Common examples include business licenses, health and safety permits, and specialized industry permits. Contact the appropriate authorities to understand the specific permits and licenses needed for your business and ensure compliance.
Bizpal is a useful tool that can help you determine which permits and licenses you need.
Step 6: Establish Corporate Governance
Once your business is incorporated, it’s essential to establish proper corporate governance practices. This includes holding initial organizational meetings, adopting bylaws, and issuing shares (for corporations). Develop a shareholders’ agreement if there are multiple shareholders to outline rights, responsibilities, and dispute resolution mechanisms. Yes – even if you’re incorporating with a friend, you’ll need to take this step. Going into business with a friend or family member can get rocky if things go south. The more formalized these procedures, the easier it will be to deal with any unexpected drama down the road. (No one thinks that will happen to them – better to be safe than sorry).
Consult with legal professionals to ensure that you comply with all governance requirements and to establish a solid foundation for your business operations.
Step 7: Register for Taxes and Payroll
Register for the necessary tax accounts with the Canada Revenue Agency (CRA) to meet your tax obligations. This typically includes obtaining a business number and registering for goods and services tax (GST) or harmonized sales tax (HST), payroll deductions, and corporate income tax. Depending on your business activities, additional registrations and permits may be required at the federal and provincial levels.
Consult with an accountant or tax professional to understand your specific tax requirements and ensure compliance with all tax laws.
Step 8: Comply with Ongoing Obligations
Incorporating your business is not a one-time event; you’ll have ongoing obligations to maintain your corporate status. This includes filing annual reports, holding regular meetings, and maintaining proper records and financial statements. Failure to meet these obligations may result in penalties or the loss of your corporation’s benefits.
Stay up to date on changes in regulations and compliance requirements to ensure ongoing compliance. You can set a calendar reminder to do this once or twice a year.
Incorporating a business in Canada involves a series of important steps, from choosing a name and structure to registering with government agencies and complying with legal and tax obligations. It’s highly recommended to consult with legal, financial, and tax professionals throughout the process to ensure compliance with the relevant laws and regulations.
Remember, this guide provides a general overview, and specific requirements may vary depending on the jurisdiction and business type. If you have any other questions about incorporating in Canada, let us know.