differences between registering a business and incorporation

As part of planning to start your business, one of the first items you will be considering is whether your business will operate as a registered or incorporated business. There are several major differences between registering a business or incorporating in Canada. Overall, each jurisdiction provides the same provisions, restrictions and limitations whether you choose to register a business in Alberta, Ontario or if you wish to incorporate in Manitoba or Canada.

The primary differences between these two options of registering or incorporation to operate your business are as follows.

Limited Personal Liability

green check markIncorporated Business red xRegistered Business

A registered business is attached to the individuals who own the business with respect to the risk of the business. If the business has risk of liability, the owners of the business incur that risk and responsibility.

An incorporated business is its own entity, separate from those who are shareholders or owners of the corporation. This provides as much separation as possible from the business risk and responsibilities and those who are shareholders or owners of the business.

Business Name Protection

green check markIncorporated Business red xRegistered Business

A registered business does not have name protection. This allows others within the Province you register to register or incorporate a same or similar named business to your business name.

An Incorporated business provides name protection for your exact business name within the Province you incorporate within. If a similar named business is registered or incorporated within your Province, you may have the legal ability to pursue a name change to that conflicting business name.

Tax Benefits, Investments and Opportunities

green check markIncorporated Business red xRegistered Business

A registered business is taxed at the personal tax rates for the individuals who own the business. Outside of business expenses from the business, there is little flexibility within the tax system with Revenue Canada. The business on its own cannot purchase properties, stocks, bonds or other investment opportunities.

An Incorporated is its own entity and therefore has the availability to issue either income or payments to the owners at the shareholders discretion. The incorporated business has the lowest tax rate available and there are opportunities to maintain lower tax revenues if the corporation is able to hold funds instead of distributing to its shareholders. The corporation is also able to invest in real estate, stocks, bonds and other investment opportunities separate from the individuals who own the business.

Flexibility to Make Changes to Business Structure

green check markIncorporated Business red xRegistered Business

A registered business has limited ability to make changes to the business structure as the business grows and changes. Within a registered business, there is the availability to change a personal or business address or business activity. The ability to add partners, change the business name, or change the structure of the business are either limited or not available.

An Incorporated business can make any corporate change to its structure over time. The availability to change the personal or business addresses, add/remove or modify the directors or officers of the corporation, change the name, change the structure, or to add a secondary business name are all accessible with an incorporated company.

Ability for new Canadians to operate the business who are not a Canadian Citizen or Permanent Resident

red xIncorporated Business green check markRegistered Business

A registered business is available to those who do not hold a Canadian Citizenship or Permanent Residents status in Canada to operate a business.

An Incorporated business does not provide the ability for any sole shareholder who is not a Canadian Citizen or Permanent Resident to operate a corporation in Canada without a minimum of 25% of the shareholders to be either Canadian Citizens or Permanent Residents on the corporation. The exemption to this is the Province of British Columbia (B.C.) where a person who does not hold a status in Canada is able to incorporate as a sole shareholder and director.

Once the business has been established, there is no need for renewal or re-registration

green check markIncorporated Business red xRegistered Business

A registered business, in most circumstances, requires renewal at some point after the original registration. Each Province has different timeframes for when a business registration is required to be renewed. There are additional fees each time the business is renewed or re-registered.

An Incorporated business is continual in all Provinces and never requires renewal. Once the incorporation is complete, the business continues to operate indefinitely.

Overall Costs

The costs of registering a business are less than the cost to incorporate in any jurisdiction. To register a business allows an individual or individuals to operate a business inexpensively. It also limits the opportunities available with the more expensive option of incorporating.

It is always recommended to seek out professionals who may advise you on what option is better for your particular circumstance. You may want to speak to an accountant or corporate lawyer and gain their knowledge before proceeding.

REGISTER A BUSINESS

ALBERTA REGISTRATION

BRITISH COLUMBIA REGISTRATION

MANITOBA REGISTRATION

ONTARIO REGISTRATION

SASKATCHEWAN REGISTRATION

If you’re interested in Incorporating, you can do so through the links below:

INCORPORATE A BUSINESS

ALBERTA INCORPORATION

BRITISH COLUMBIA INCORPORATION

MANITOBA INCORPORATION

ONTARIO INCORPORATION

SASKATCHEWAN INCORPORATION

FEDERAL INCORPORATION

If we can be of assistance, please feel free to reach out to our staff for any clarification or assistance you may require.

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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.