How to Change Your Sole Proprietorship to an Incorporated Company
Originally Published: Jan 1, 2019
When a company begins growing, many business owners start wondering how they can switch their Sole Proprietorship into an Incorporated company. If you’re looking to incorporate, congratulations on expanding your business to the point where incorporation is the better option for the future of your business. And, it’s easier than you may think to make the switch from Sole Proprietorship to an Incorporated company.
Am I able to use the same business name?
Yes, you can absolutely use the same name as the business you are currently operating if you choose. The only thing that will need to change is to add a legal ending to the business name. There are six options for legal endings you can choose from:
- Inc.
- Incorporated
- Ltd.
- Limited
- Corp.
- Corporation
If you are looking to incorporate a named company, a Nuans report is required to show any names that are similar to your proposed corporate name. This report would also show your current Sole Proprietorship so, if you’re using the same name, you would be asked to confirm that the Sole Proprietorship appearing in the Nuans report is indeed yours. Then, providing there are no existing businesses that appear to be conflicting with the name, we can proceed to incorporate your business.
What other information is required to Incorporate?
When incorporating your business, you’ll be asked for information similar to what you provided when you first registered your Sole Proprietorship, including:
- Your business address
- Your legal name and address, and the names and addresses for any other directors to be listed
- The share structure you want to use (you can choose from either 1 or 2 classes of shares or you can provide your own structure.)
- The minimum and the maximum number of directors (Most businesses choose to list a minimum of 1 and maximum of 10 directors, in order to leave room for any expansion or reduction of directors over time.)
- Your telephone and email address, which is solely used for us to communicate with you
Am I able to add another person to the incorporation?
If you wish to add another person to your incorporation as a director, who was not previously a part of your original business, you can absolutely do that with your filing. Additionally, if you ever decide to add someone to your incorporation as a director or remove someone, you’ll simply need to file a Notice of Change.
How long does the process take?
We at Ontario Business Central offer same day Incorporation services Monday through Friday, with orders submitted before 3 PM. If you need assistance, we are available weekdays between 9:00 am and 5:00 pm.
There are some differences between an Ontario Incorporation and a Federal Incorporation. Here are some of the key similarities and differences:
Ontario Incorporation vs. Federal Incorporation
Both Ontario and Federal jurisdictions for incorporation offer the following:
- Considered a separate entity from individual owners
- Limited personal liability
- Tax rate advantages
- Greater access to capital
- Continuous existence
- Name protection within their jurisdiction
In terms of differences, these are the main ones you’ll see between the two jurisdictions:
Ontario Incorporation
- Higher start-up costs, government fee $360
- One mandatory filing after incorporation
- Fewer formalities
- Business name protection in Ontario only
- Limited foreign recognition (Ontario)
- Easier name acceptance
Federal Incorporation
- Lower startup costs, government fee $200
- Yearly mandatory filings @ $50 per year
- More formalities
- Higher name protection within Canada
- Higher foreign recognition (Canada)
- The business name must be accepted by a federal examiner
Read more about the differences between an Ontario and Federal Incorporation.
Each type of legal entity has its advantages and disadvantages. Depending on the importance you place on business name protection within Canada, name accessibility to register the corporation in other Provinces, the interaction of foreign individuals and corporations with the corporation, and the administration requirements, each form of incorporation has its merits and limitations.
What happens to my Sole Proprietorship after Incorporation has been completed?
Generally, it takes about a week to set up everything for a new corporation, including setting up your new bank account and making changes to cheques and business cards. After this is all done, you will want to cancel the currently registered Sole Proprietorship. If any HST, WSIB, or payroll accounts exist with the registration that is being cancelled, these would also need to be cancelled as well, and set up under the newly incorporated company.
Once the Incorporation has been completed, what do I need to change or update?
- Bank account – incorporating puts your business into a new business category with most banks. Check with your bank to see if a new bank account will be needed
- Cheques – new cheques will need to be issued with the business name to include the legal ending, and the new bank account information
- Tax accounts – Any HST, payroll, WSIB, or other accounts will need to be set up for the corporation or changed
- Business cards – to reflect the new corporate name
- Letterhead – to reflect the new corporate name
- Logo – if the business name appears within the logo, it should be updated
- Storefront/signage
We can assist you with both the registering your new incorporation and with cancelling your current Sole Proprietorship, if you choose to do so.
Cancel Your Sole Proprietorship
Should you have any questions about canceling your Master Business Licence or Incorporating, please feel free to contact our office for more information or assistance.
inquiries@ontariobusinesscentral.ca
Toll-Free: 1-800-280-1913
Local: 1-416-599-9009
Fax: 1-866-294-4363
Office Hours: 9:00am – 5:00pm
Monday – Friday E.S.T.
Ontario Business Central Inc. is not a law firm and cannot provide a legal opinion or advice. This information is to assist you in understanding the requirements of registration within the chosen jurisdiction. It is always recommended, when you have legal or accounting questions that you speak to a qualified professional.
