How to Incorporate a Business in Canada
There are various steps to incorporate a business in Canada.
Let’s take a look at this beginner’s guide to incorporation.
Follow these simple steps to get started today!
What is Incorporation?
- By incorporating your business, it becomes a separate legal entity with rights and obligations of its own and separating the business from its owners.
- Businesses can do things in their names such as entering into contracts, paying salaries to employees, opening bank accounts etc.
- Corporate ownership can be divided between several people. This allows profits to be distributed in the form of dividends.
What are the benefits of Incorporation?
- Business owners are not personally liable for the debts and obligations of the organization. Without incorporation, you will remain personally responsible for the company’s debts and your personal property will be all at risk.
- The corporate tax rate is lower than the tax rate for individuals. Businesses may benefit from certain tax planning techniques such as income splitting and deferral.
1. Choose a Business Name
Choose a name that is unique and hasn’t been taken by another business. The three legal requirements of a business name are a distinctive element, a descriptive element and a legal ending (eg, Lizzy’s shoe store Ltd.). The legal name and the brand name are not always the same.
Check Canadian Trademarks to determine whether anyone else has already trademarked the name you want. Use the Canadian Trademarks database to search.
2. Choose a Jurisdiction
In Canada, each province and territory has its incorporation laws and regulations. Choose the one that depends on your business goals. You can choose to incorporate your company either on a provincial or federal level in Canada.
3. File Articles of Association
The filing of articles of association is a crucial step in the incorporation of an organization in Canada. You need to file the initial registration forms with the government. Articles of incorporation contain basic information about the business, such as its name, goals, share structure, and rules and regulations.
The articles of incorporation must be submitted to the relevant government agency. At this time, the filing fee and any necessary taxes must also be paid. The company will obtain a certificate of incorporation from the regulatory body after the articles of incorporation are submitted and accepted. This certificate indicates the company’s current status as a legal entity. Choose basic incorporation if you are incorporating a small business.
4. Obtain Permits & Licenses
Depending on the type of business that you’re starting and where it will be located, the licenses and permits you should obtain varies. A business license, trade license, building permit, health and safety permit, and other documents are examples of these.
It’s crucial to research the regulations for your particular business because they can differ by province and region. To learn more, you can contact your local government or use internet tools.
- Register for a Federal Business Number. It is a nine-digit number assigned by the Canada Revenue Agency (CRA) to businesses
- You can also register for other program accounts, such as a GST/HST account or a payroll account
- Obtain any other required Provincial and/or municipal licenses
5. Set up Corporate Records
Establish a minute book for the business. A minute book is a record-keeping system that contains the company’s articles of incorporation, bylaws, shareholder agreements, and other important documents. All important company decisions, such as issuing shares, appointing officers, and making major financial decisions, should be recorded in the minute book.
Maintain a shareholder register, which is a record of all shareholders in the company, including their names, addresses, and shareholdings. It should be updated regularly to reflect any changes in ownership.
Businesses should keep financial records which are essential for tax purposes and to monitor the company’s financial performance. Financial transactions include receipts, invoices, and bank statements.
6. Setup Corporate Bank Account
Setting up a corporate bank account for your business is an important step in managing your finances and maintaining accurate accounting records. To open a corporate bank account, you must provide the bank with a copy of your articles of incorporation and any articles of amendment. Before they are allowed to sign cheques or access the corporate account, all authorized signing officers of the corporation must sign.
It’s a good idea to consult law firms to understand all the required information about incorporating a business in Canada. They will guide you through all the legal issues and you can make the right decisions.