Pros and Cons of Incorporation

  • Incorporporation provides many benefits not available to the alternate choice of registering a business. When you incorporate a business, you have the peace of mind that the business is a separate body from you as an individual. This allows you as an individual to keep your personal wealth as much removed from the business as possible.
  • The incorporation has its own tax account and responsibilities. With this, a corporation has a lower tax rate than individual taxation and provides the ability to split income, and defer taxation.
  • Any aspect to the corporation can be changed at any point. This includes changing the business name, the structure of the business, the directors, officers and shareholders of the business.
  • At any point, you can add a secondary business under the corporate entity. This allows the opportunity to create another business name and expand your opportunities to gain additional clients and revenues.
  • If you are looking for venture capital, a corporation provides an open door to these opportunities.
  • Looking into the future, if you wish to at some point sell your business, having the business operational as an incorporated company provides more opportunities and options in how you sell your business and therefore more options are available to the purchaser as well.
  • Not only can you save money by keeping it within the corporation, but you can also invest that money on behalf of the corporation. This includes holding real estate, stocks, bonds and other investment opportunities.
  • The corporate name exactly as incorporated has business name protection. This gives as much protection to your brand as available without completing a trademark in Canada.
  • There are a few items to keep in mind when incorporating a business in comparison to registering.
  • The starting fee to incorporate a business is higher than when registering.
  • You will be required to keep corporate records for the business. This may include the shares of the corporation, the minutes of the meetings and yearly corporate record updates with the Federal government.
  • The incorporated body has its own tax account and tax filing requirements separate from the directors of the corporation.

Do you Need to Incorporate Federally or Provincially?

It is up to you whether you incorporate in the Province the corporation will operate within or determine to Federally incorporate. Both provide you with the business name protection, personal liability protection and tax advantages. The Federal corporation also provides the best available business name protection across Canada outside of completing a trademark and allows you to opportunity to register your corporation in multiple various Provinces or Territories when the business will operate and have a registered office within that jurisdiction.

What is the Difference Between Incorporation and Corporation?

Both words are commonly used when speaking of starting a business as an Incorporated business. Incorporation is the process of setting up the business and corporation is a word describing the business once the business has been established. There are a number of words used to describe the incorporation and to provide a few more, you may see or read these encompassing words such as Articles of Incorporation, incorporated company, limited liability corporation or company, and corporation in Canada.

Details Required to Incorporate

How do I open an incorporation?

Select whether the incorporation will simply be a numbered company incorporation or if you would like to have the business as a named entity.

  • Registered office address for the corporation
  • Directors full names and addresses
  • Number of shares for the corporation. We have options available for one or two classes of shares or you can upload your specific requirements
  • Select what legal ending wanted for the corporation

What is Required to be a Director of a Canadian Incorporation?

  1. People who are age of majority (18)
  2. No bankruptcy proceeding
  3. No criminal history
  4. Minimum of 25% of individuals who are required to be Canadian

What is the Turnaround Time?

A Federal incorporation can be as quick as 2 hours for a numbered corporation or 3 hours with a named corporation for rush service up to a 24 hour turnaround time Monday to Friday, EST.

How to Choose a Corporate Name?

When you are opting for a Federal or Canada Incorporation, the corporate name choice is very important. The Federal business name is reviewed against any other businesses and trademarks around Canada. Choosing a very unique name is a must. The business name requires a primary keyword that is not commonly used. Often incorporators will opt for a made up name such as ‘Eltik,’ where the name is not a dictionary word. It is also imperative to provide the type of business you are provided such as analytics, lawn care, business services or something that allows the Federal government to understand your designated industry.

What is an Annual Return?

The Annual Return is required by each incorporated company that has been started with the Federal government. The Annual Return provides any updates to the corporate record for the corporation including the registered office address or current directors and addresses. Whether the corporation has any changes or not, the filing is still mandatory each year on the anniversary of the incorporation. If the corporation does not provide the Annual Return filing, after a 2 year period, the corporation will be cancelled by the Federal government. The government fee to complete the Annual Return is minimal and currently is $20.00.

NUANS Pre Search and Report Information

A Federal NUANS report is mandatory with completing the Articles of Incorporation or Incorporation documents with the Federal government. The report itself provides comparable business names and trademarks to the prospective corporate name of your choice. To avoid a rejection of the corporate name from the Federal examiners, it is important to complete a pre-search or prescreen of the prospective corporate name to avert the possibility of a same or similar named existing business.

Minute Book and Seal Requirements

As you go through the incorporation process, you will be asked if you wish to obtain a minute book and seal. The minute book is a corporate legal book that assists you to keep track of the changes to your corporation as time goes on. In many jurisdictions it is a requirement and is highly endorsed by those within the legal community. The seal is a steel product used to emboss your corporate name and jurisdiction of incorporation for many business opportunities.

Applying for HST, Payroll or WSIB

When the incorporation is complete, Revenue Canada will subsequently initialize the corporate tax identification number or BN number for your newly incorporated business. It may be that your business is a start up where tax accounts are not yet required or it may be from the beginning of your business the tax account is vital. If the business will earn $30,000 or more yearly, if you will hire employees or operate a business in Ontario that involves the WSIB account, it may be easier to set up these accounts as you incorporate. Once the operation of your business reaches the $30,000.00 yearly in sales, or hires employees or becomes equated to the required WSIB, you must establish the tax according tax accounts.

How to Operate a Secondary Business Name?

You may find an opportunity where registering another business name outside of your corporate name becomes advantageous to you and your business. This may include a branch of your current business that may focus on a different aspect of your business capabilities or it may be to specialize in each area where you wish to market different business names as ideas to determine which is the most fruitful for your success. No matter the circumstance, with completing an incorporated business, the opportunity is always there to at any point add a subsequent business name or names to your corporate presence under your corporate umbrella. Specifically with a Federal or Canada incorporated company, the subsequent or trade name will be registered under your Provincial record for your Federal incorporation.

What is Required After Incorporation?

With a Federal incorporation, it is mandatory that you select the Province where the corporation’s office address will exist. This can be completed as part of the electronic incorporation process within the Federal incorporation or can be completed manually with the chosen Province. This is called an Extra Provincial licence and is available electronically in Newfoundland and Labrador, Nova Scotia, Ontario, Saskatchewan, Alberta and British Columbia.

After incorporation, you may also want to consider the following:

  • Create corporate bank account
  • Obtain corporate cheques, lines of credit
  • Secure domains and web presence
  • Facilitate wholesale pricing and distribution
  • Establish any required tax accounts. Corporate account is automatic
  • Legal documentation between partners of business
  • Distribute shares to shareholders of corporation
  • Find professionals to assist you with your business such as lawyers or accountants
  • Become a member of association within your industry
  • Acquire business insurance

Along with this information, a free bizguide is provided to you when you incorporate with Ontario Business Central. The Bizguide provides further assistance to new business owners including taxable income, organization, staffing, support services and infinitely more.

If you have questions, feel free to reach out and speak with one of our expert staff.