Incorporation is the legal process used to form a company or a corporate entity. The result of this legal process is to form a company that helps separate business assets, taxes, and financial obligations from its owners. Therefore, your business will be treated legally as a separate entity and held responsible for any action, unlike sole proprietorship.
If you’re starting a business in Ontario, Canada, you may want to incorporate it to get limited liability tax incentives and increase familiarity with stakeholders. This, in turn, will help your business grow faster.
What You Need Before Incorporation
Before you incorporate in Ontario, there are several things you’ll need to have. This will help speed up the process and avoid legal and logistic hurdles. They include the following:
- All the directors in your startup should be at least 18 years old.
- You must have a registered office within Ontario and a mailing address.
- Prepare the legal names and addresses for each director in the business.
- None of the directors for an Ontario corporation are required to be Canadian
Why You Should Incorporate Your Business
There are several reasons why you should incorporate your business in Ontario. Some of the major benefits include the following:
- You get protection from what the business does, hence you may have limited or no liability for any financial or legal obligation facing the business.
- Incorporation opens up more channels for financing and investing, which will help your startup get more potential.
- Opens up different ownership and payment structures even when the founders depart the business.
How to Incorporate Your Business
Once you have all the documents and requirements, you can go ahead with the incorporation. The process of incorporating your startup in Ontario is relatively straightforward, and this is how you can do it:
Choose a Corporate Name
Remember that every incorporated business in Ontario should have a name that identifies it. This name is known as the corporate name, and it can either be a single or number of words followed by a legal ending or numbered corporation where you simply provide the legal ending to the corporate name.
The province provides the specific number assigned to your incorporation.
A numbered name is the easiest way to name your business. This is because the number is assigned to you. However, you can still use a different name to conduct your business by adding a Trade Name under your corporation.
By using a word name, you’ll have legal rights to use it anywhere once it gets approved. You may want to choose a word name for business and branding purposes because it’s easier to memorize for future customers.
Create Articles for Incorporation
You’ll have to establish the structure of your business during the incorporation process. In order to do so, you’ll need to create Articles for Incorporation. You can either choose the basic incorporation option or the custom incorporation route. However, as you’re starting up, the basic package is more suitable as it’ll take the guesswork away. With this package, you can have the following:
- Pre-determined incorporation articles that can be amended if need be.
- Selection of either one or two classes of shares.
- The ability to choose the parameters of the directors, typically a minimum of 1 and a maximum of 10 directors.
Alternatively, you can choose the custom incorporation format where you’ll have to:
- Specify the name of the corporation.
- The share structure in the business and if there are any share restrictions in the business.
- The number of directors in the corporation.
- Any other provisions, such as restrictions, that you may want to set for your business activities.
The Articles of Incorporation can either be in English, French, or both.
Create and Maintain a Minute Book
A minute book is a binder or a file that contains all the documents that a corporation is required by the law to have. Such documents include the Articles of Incorporation, shareholders’ agreements, copies of forms filed with the government, and ledgers of directors and shareholders.
A minute book is crucial because it gives your business a corporate status. For this reason, it should be ready and updated all the time––during and after the incorporation period. (3)
Apply for Relevant Tax Accounts
Once your business has been filed with the Ontario government, you’ll be required to apply for or open the relevant tax accounts that you’ll need in your business. Some of these accounts include the following:
- Harmonized sales tax: If your business generates more than CAD$30,000 annual taxable sales, you need to apply for this account. In Ontario, the HST rate is 13% (5% nationals and 8% provincial).
- Import/Export Account: Incorporating your business means you plan to go bigger in business, including trading with other countries. Therefore, it’s essential to open this type of account early enough.
- Payroll deduction account: As your business hires employees s, it’s mandatory to have a payroll account that’ll cater to their pay.
Establish the Original Registered Address
As mentioned earlier, every established business should have a registered office address and board of directors. This office is where you’ll keep your business records or receive documents served to the corporation. Any document sent to this address will count as legally received by the corporation, so ensure that you choose a convenient address.
Moreover, you can establish a board of directors based on the incorporation guidelines to ensure they meet the eligibility criteria. This includes their first name, last name, address, and if they’re residents of Canada. After everything is set, you can submit your incorporation details and pay online to get registered as a corporation.
It’s important to note that same-day service applies for the Ontario provincial government to process your application when you’re incorporating as a named or numbered company. After the business is present with a business number and certificate of incorporation, it can only be dissolved by a formal process.
Incorporating your business is one of the best decisions you can make to grow your business and protect your assets. If you’re in Ontario, you can follow all the due processes required by the provincial government or look for a company to help you incorporate your business. This will help you get your business up and running in no time.
- “How to incorporate in Ontario yourself”, Source: https://www.ontariobusinesscentral.ca/blog/how-to-incorporate-in-ontario-yourself/
- “How to incorporate a business”, Source: https://www.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs06642.html
- “Incorporation Checklist – Ontario”, Source: https://www.lawdepot.ca/law-library/faq/incorporation-checklist-ontario/?loc=CA&#.YfpqiupBzIU
- “How to Incorporate a Business in Ontario (2020): Simple Guide for New Entrepreneurs”, Source: https://ontariobusinessgrants.com/start-a-business/how-to-incorporate-a-business-in-ontario/