How to incorporate your business in Canada
Incorporating a business stands as a significant decision for any entrepreneur, often accompanied by a wealth of advice that can sometimes overcomplicate the process. Fret not, as this article is a comprehensive guide to understanding the process of incorporating a business in Canada. So, let’s delve right into it!
Determining the Right Time for Incorporation
Advantages of Incorporating
Steps to Incorporate Your Business in Canada
Cost Considerations for Business Incorporation
Federal vs. Provincial Incorporation
Roles Within a Corporation
Structuring Your Corporation
Determining the Right Time for Incorporation:
Entrepreneurs often contemplate incorporation due to the advantages it offers, such as limited liability and tax benefits. Separating personal and business obligations becomes crucial, especially given that Industry Canada’s study indicates only a 50% survival rate for small businesses past their initial five years. Incorporation can shield personal assets from business debts, unlike sole proprietorships or partnerships where personal belongings like homes and cars are at risk.
Advantages of Incorporating:
In addition to the critical benefits of limited liability and tax advantages, incorporating brings forth several other advantages:
- Raising Capital: Incorporation is essential when seeking investor funding, as it allows for the sale of shares.
- Professional Image: An incorporated business exudes professionalism, enhancing client confidence.
- Transferability: Corporations can be easily transferred through share sales, simplifying long-term succession planning.
- Continuous Existence: Corporations can persist beyond their owners’ lifespan.
Steps to Incorporate Your Business in Canada:
The process starts with selecting a business name that meets specific legal criteria. A distinctive element, a descriptive element, and a legal ending must be present. Conducting a trademark search to avoid conflicts is also recommended. After choosing the name, articles of incorporation need to be filed with the government. Ownr offers automated assistance for these initial steps.
Cost Considerations for Business Incorporation:
Incorporating via Ownr ranges between $499 and $699, incorporating both government fees and formation documents. Government incorporation costs vary among provinces, making professional assistance crucial for compliance. You’ll also enjoy $300.00 back on all incorporations when you open a new RBC Business Bank Account.
Federal vs. Provincial Incorporation:
Both federal and provincial incorporation options exist in Canada. Federal incorporation offers broader name protection and is essential for businesses aiming to operate across provinces. Federal corporations may necessitate Canadian resident directors in some cases, unlike several provinces.
Roles Within a Corporation:
Corporations involve three primary roles: shareholders, directors, and officers. Typically, one person takes on all roles in small businesses.
Structuring Your Corporation:
Multiple share classes can be created to allocate rights and privileges among shareholders. Different classes can allow for varying levels of involvement and benefits. These include voting and non-voting shares, common shares, and preferred shares.
Upon incorporation, maintaining proper documentation is essential. An organized record-keeping system, annual returns, and resolutions help ensure ongoing compliance with legal obligations. Ownr streamlines these requirements, simplifying the process for businesses.
In conclusion, business incorporation involves crucial decisions driven by the desire for limited liability and tax benefits. This guide offers comprehensive insights into the process, advantages, costs, and ongoing responsibilities, aiming to empower entrepreneurs on their journey to incorporation.
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