How to Incorporate Your Business: A Guide For Small Business Owners
From limited liability to lower tax rates, incorporating can provide several benefits to your small business.1 However, there are several steps one must take to incorporate. Below we’re walking you through the process of incorporating a business in Canada.
Step #1: Select a Federal or Provincial Corporation
Before starting the process of incorporation, you will need to choose either a federal or provincial corporation. Each option comes with different benefits and disadvantages.
Incorporating on a federal level provides several benefits including:1
- Rights to a unique name across all of Canada.
- Businesses that incorporate at a federal level are recognized globally.
- Your business address is not locked to one province.
However, incorporating federally also comes with some disadvantages such as:2
- Specific naming requirements.
- Increased recording and paperwork requirements.
Incorporating your business at a provincial level restricts your business operations to that province.2 You may miss out on some of the benefits of a federal corporation, but you’ll also free your business from some of the disadvantages as well.
Step #2: Select a Name for Your Corporation
Your corporate name is your business’s legal identity. There are two options for selecting a corporate name:3
- A word name consisting of letters and symbols.
- A numbered name selected by the government.
Incorporating a business with a name also comes with several additional requirements to make sure it is identifiable and distinct. This can add to the challenge of finding a name.4 Once a corporate name has been selected, you will need to reserve it. This process changes depending on your province, be sure to check requirements before moving forward.2
Step #3: Establish Your Articles of Incorporation
There are two general options to establish your articles of incorporation: a basic incorporation or a custom incorporation.3 These act as the structure for your corporation.
A basic incorporation provides:3
- Pre-determined, amendable articles.
- A numbered name.
- Set limitations to share classes.
- A maximum number of directors.
A custom incorporation provides more flexibility and requires:3
- The name of your corporation.
- A share structure, including any transfer restrictions.
- The number of directors.
- Any additional restrictions and provisions.
Your articles of incorporation may be written in English, French or a combination of the two.
Step #4: Create Your First Board of Directors
To be selected as a member of the board of directors an individual must:5
- Be 18 or older.
- Not be legally declared incapable by the laws of any territory or province of Canada or by a court outside of Canada.
- Be an individual.
- Not be bankrupt.
Once a member meets these requirements you must also provide their first name, address and residency status.3
Step #5: Set a Registered Office Address
Your registered office is the address where corporate documents will be sent and kept. After incorporation is complete, this address will be made public along with the members of your board of directors.3
Step #6: Apply for Incorporation
Application and fees may be processed online or via mail, depending on your province.3
Once the process is complete, you will be legally ready to start growing and operating your small business. If you’re considering embarking on this process, work with a trusted financial partner who can help answer any questions along the way.