Incorporate in Ontario: A Complete Guide to Business Success
It’s through incorporation that your business in Ontario becomes a game-changer, giving you a solid firm from which to accrue other benefits such as credibility and legal protection. This entire guide shall take you on a tour to understand the benefits, requirements, and steps incorporated into incorporating your business in Ontario. From federal incorporation all the way to drafting corporate bylaws, we cover everything you need to know to get your business effectively incorporated in Ontario.
What Are the Benefits of Incorporation?
Some of the key benefits of registering a business in Ontario:
- Protection of limited liability: personal and business assets are kept separately from incorporation; thus, the personal wealth is protected from business liabilities and debts.
- Tax Advantages: There may be lower tax rates, income splitting, and other special tax advantages unavailable to sole proprietorships or partnerships.
- More credibility: An incorporated business is considered more stable and credible, and therefore can easily attract investors, customers, and partners.
- Succession planning and continuity: The corporations exist beyond the lives of their founders; hence, they provide for stability and a clear succession plan.
- Raising capital: It is much easier for corporations to raise capital by the issue of shares, and getting funds that would help in growth and expansion.
Federal Incorporation
A Federal Corporation is the name used for a company that is registered or incorporated under the Canada Corporations Act. Federal incorporation, therefore, means that a corporation can do business in all provinces and territories of Canada and its purpose is clearly national in scope. While a provincial corporation can do business only in the boundaries of the province in which it is incorporated, a federal corporation has more flexibility to carry on business activities across the whole country without any further registration in various provinces.
What are the benefits of Federal Corporation?
- Name Protection. A federally incorporated company benefits from name protection across all provinces and territories, which helps in building a national brand identity.
- Expansion Flexibility: Federal incorporation allows businesses to expand operations more easily across provincial and territorial boundaries without needing additional registrations, making it ideal for companies with national aspirations.
- Global Recognition. Federal corporations are recognized around the world, an important consideration if you plan to expand outside Canada.
- Flexibility. Your official business address can be anywhere in Canada, and you can hold annual meetings digitally and anywhere in the world.
Who can start a Federal Corporation?
- One or more individuals above the age of 18;
- 25% of directors must be a Canadian Citizen or a Permanent Resident (PR).
Requirements:
- Minimum one incorporator, director, shareholder and officer.
- The registered office address must be a physical address in Canada, P.O. Box address is not allowed. If you don’t have a local provincial address, we provide registered address and mail scanning service.
- A Federal corporation, although registered federally, must also register in the extra province or territory where the corporation is conducting business.
Professional Incorporation
An Ontario Professional Corporation(OPC) is a type of business entity that permits certain regulated professionals in the province of Ontario, Canada to incorporate their practice while at the same time maintaining limited liability protection. Specific rules and regulations under the Ontario Business Corporations Act (OBCA) govern these corporations with relevant professional regulatory bodies.
Who can Incorporate?
An Ontario Professional Corporation is a relevant vehicle for individuals possessing a professional license or certification in some controlled professions: physicians, lawyers, chartered accountants, dentists, professional engineers, and other regulated professionals.
What are the benefits for having an Ontario Corporation?
One of the most important benefits that can be derived from the formation of an Ontario Professional Corporation is personal liability protection. Personal assets of the professional are usually protected against business-related liabilities, debts, and legal claims arising from professional services rendered by the corporation. You can easily make changes in your corporation, for example, changing the name, changing the corporation structure, etc. Some of the ways in which Ontario corporations could realize some tax advantages, however, would be through qualifying for the small business deduction rate on active business income, which is lower than the general corporate tax rate. A corporation may endure despite changes of its shareholders or their death. Corporations have a much easier access to capital and investment than sole proprietorships and partnerships. The reason behind it is that people are always interested in investing more in a corporation due to the limited liability structure and the growth option they offer.
Ontario Non-Profit Organization
An Ontario NPO, commonly known as a non-profit organization, is a legal body functioning for reasons not involving profit distribution to the members or owners of the organization. Nonprofits in Ontario are usually incorporated under the laws of Ontario, either under the Ontario Corporations Act or the newer Not-for-Profit Corporations Act (ONCA). Not-for-Profit Corporations are regulated differently than ordinary For-Profit corporations. For a Non-Profit, all profits are not distributed to its members, instead put back into the operations of the business. Therefore, a Non-Profit does not have a share capital.
Benefits of the Non-Profit Organization in Ontario.
Non-profit organizations in Ontario can get tax exemption or pay no income tax on the surplus income they accumulate. This makes it more resources to achieve the charitable or organization community goals. Government, foundation and other sources can fund nonprofit organizations that are purposefully marked for charity and community organizations. It may be used in giving aid to program delivery, operation cost, and community capacity-building endeavors. Nonprofit corporations give limited liability protection to directors, officers, and members. This means that the individual members forming the organization are largely not personally responsible for the obligations and debts of the organization, except as provided for under law.
Requirements for Incorporation
Minimum of 3 directors and applicants. The directors are not required to be residents of B.C. Must be of a non-profitable nature and may be anything such as social services, education, arts, and culture promotion, health matters, a cause, community issues, among others.
Required to Incorporate
These are the few main requirements that must be accomplished prior to incorporation in Ontario:
- Company Name: You must register a name that is exclusively distinctive to your corporation and complies with the naming standards of Ontario.
- Directors and Officers: At least 18 years of age, not bankrupt, sound mind.
- Registered Office: Your corporation is required to have a registered office in Ontario for receiving official documents and notices.
- Articles of Incorporation: You must prepare and submit the Articles of Incorporation to the Government of Ontario.
- Initial Corporate Bylaws: It is very important to prepare corporate bylaws, as it will provide the ways for handling internal management of your corporation.
Choosing a Name for Your Business
One of the most important steps, after making the decision to incorporate in Ontario, is name selection. It has to be unique and must not clash with already existing names, either registered or trademarked. The name should also be reflective of your brand and easy for people to remember. You can do a search on the Ontario Business Registry to make sure that name is available. In addition, you may also reserve that name for a period while you complete the incorporation process.
Choosing a Jurisdiction
Once you have decided to incorporate in Ontario, you have to determine whether to incorporate provincially or federally. If you go for the provincial route, your business will be allowed to operate in Ontario only. But if you opt for the federal form, then the boundaries of operation open up for you to work anywhere across Canada. This decision too has to be made based on the business objectives, levels of operations, and expansion plans in the future.
Drafting the Articles of Incorporation
The Articles of Incorporation are your legal document that brings your corporation into existence. The following information must be included:
- Business Name: Name of your business as chosen by you.
- Address of Registered Office: The address of the registered office of the corporation in Ontario.
- Share Structure: Information related to classes, and the number of shares the corporation is authorized to issue.
- Directors: Names and addresses of the first directors.
Filing the Articles of Incorporation with the Ontario Ministry of Government and Consumer Services is a crucial step to incorporate in Ontario.
Appointing Directors and Officers
Appointing directors and officers is an important step of the incorporation process in Ontario. Your directors are responsible for overseeing your corporation’s activities and taking large-scale decisions. On the other hand, officers look into managing day-to-day operations. Be careful to appoint only directors and officers who meet all legal requirements and who will be capable of acting in the best interests of your corporation. Note down their appointment and any changes in the corporate records.
Writing a Share Structure
This indicates the various kinds and number of shares that may be issued by your corporation. The share structure outlined below largely dictates issues that might arise in regard to ownership, control, and how capital can be raised. The common share structures include:
- Common Shares: Common shares are with voting rights and allow the shareholders to have a share of profits.
- Preferred Shares: Preferred dividends and, in the case of liquidation, preferred claims on available funds, but they may have limited or no voting rights.
Define the best share structure for your business requirements and put it in writing in your Articles of Incorporation.
How to Register Taxes and Permits
After you have incorporated in Ontario, there are a number of taxes and permits to which you must register in order to operate your business legally. These may include:
- Harmonized Sales Tax (HST): Register for an HST account if your business revenue exceeds a certain threshold.
- Corporate Income Tax: Apply to have a corporate tax account with the Canada Revenue Agency.
- Payroll Deductions: If you have employees, sign up for payroll accounts to remit deductions such as CPP, EI, and income tax.
- Industry-Specific Permits: Depending on the type of your business, you may need additional permits or licenses from municipal, provincial, or federal jurisdictions.
Creating Corporate Bylaws
Corporate bylaws: Essential for governance within the corporation. Corporate bylaws outline the rules and procedures for:
- Hold Meetings: Procedures for general annual, special, and board meetings.
- Voting Rights: Instructions for the voting of shareholders and directors.
- Director and Officers: Roles and Responsibilities, Term of Office.
- Shareholder Rights: Rights and liabilities of shareholders, including those relating to the transfer and transmission of shares.
- Conflict Resolution: Processes for settling disagreements within the organization.
Composing all-inclusive and clearly defined bylaws is important in ensuring smooth corporate governance and also reducing any possible conflict.
Maintaining Corporate Records
If you’ve incorporated in Ontario, as a business owner you must keep accurate and current corporate records. The following is a list of records:
- Minutes of Meetings: Elaborate records of meetings with shareholders and directors.
- Shareholder Register: A list of all shareholders and the quantity of shares they hold.
- Register of Directors and Officers: Information about current and past directors and officers.
- Financial Statements: Annual financial statements and reports.
Maintaining detailed records ensures conformity with legal and regulatory requirements and supports the smooth operation of a business.
What are the incorporation steps?
Step 1. Name your corporation.
Choose if you want a numbered or a named corporation:
- A numbered name is the simplest way to name your corporation because the government assigns the number (for example, 12345678 Ontario Inc.).
- Your company can be named and have a unique name that sets you apart from your competition.
- Please include the legal suffix like Inc./Ltd./Corp. at the end of your name.
- An Ontario NUANS Reservation Report is required to register a Named Corporation. You can obtain a NUANS Report.
Other recommended service providers that are Registered NUANS Members:
- NUANS Search Service Providers: These companies or individuals specialize in conducting NUANS name searches to ensure that your business name is unique and not already in use.
- Business Incorporation Services: Providers who offer incorporation services often include NUANS name searches as part of their packages.
- Legal Firms: Law firms with a focus on corporate law or business formation often provide NUANS search services as part of their legal support for setting up new businesses.
- Business Registration Consultants: Consultants or firms that assist with business registration in Canada can offer NUANS searches as part of their service offering.
- Government-Approved Service Providers: There are service providers approved by federal or provincial governments to conduct NUANS searches. Checking the official NUANS website or contacting a provincial business registry can provide a list of these providers.
- Online Service Platforms: Online platforms that offer business formation services, often with quick and easy access to NUANS searches.
- Accounting Firms: Some accounting firms provide business registration services, including NUANS searches, particularly if they cater to small businesses and startups.
- Professional Associations: Associations of business professionals or corporate service providers might have directories of members who are registered NUANS members.
Step 2. Select your articles of incorporation:
This step establishes the structure of your corporation. Choose the right share structure:
- Basic: one with unlimited common shares with no specific share class.
- Standard: common shares with class A voting and class B non-voting.
- Custom: this share structure allows to categorize shares into many types such as common, preferred, voting, non-voting etc.
Step 3. Establish the office address.
- Registered office address must be a physical address in Ontario.
- Mailing address can be a P.O. BOX.
- You are allowed to have a legal land description address too but must have a P.O. Box connected to it.
- If you don’t have a local provincial address, we provide registered address and mail scanning service.
Step 4. Decide who will be a director, shareholder, officer and Incorporator.
Director – is the head of the corporation. You can add up to 10 directors.
Shareholder – owns the corporation and receives profit from the business as dividends and shares.
Officer – is anybody including an employee, no decision making power.
Incorporator – is the person under whose authority the corporation is created. Is not changeable.
Ongoing Compliance Requirements
As you incorporate in Ontario, you are further agreeing to a continuing stream of compliance responsibilities for keeping your corporation in good standing. These include:
- File an annual return with the Ontario Ministry of Government and Consumer Services to bring your corporate information up-to-date.
- Annual General Meeting (AGM): Through an AGM, the business is able to present its financial statements, elect its directors, and air out any questions or issues that shareholders have.
- Corporate Filings: File changes to directors, officers, registered office, or share structure in a corporate registry.
- Annual financial statements and corporate tax returns.
Keeping up with such compliance requirements ensures that your corporation is always in good standing and does not face any penalties.
Mandatory items to run a business.
- Minute book: consists of bylaws, share structure, minutes & other legal sections. Without it, a corporation is not complete.
- Initial Return: It’s a mandatory filing with Service Ontario for each new corporation. It has to be filed within 60 days of Incorporation. It confirms the details of the corporation. It is not a tax filing with CRA.
- Business Number: It is a unique identification of your business with the Canada Revenue Agency. It is required for account registration like GST/HST, Payroll, and Import/Export accounts.
- Corporate Tax ID: It is like a SIN number for a corporation.
- HST Registration – Harmonized Sales Tax: If you are selling goods and collecting HST you can have an HST account. every time a business incurs an expense – be it rent or paying for goods – it pays HST, if you set up the account, you can claim it back.
- Payroll Account: If you have employees, including yourself, you must set up a payroll account.
- Import/Export: If your goods or raw materials cross the Canadian border, you are required to clear customs using the Import/Export account.
- WSIB Account: It’s the Workplace Safety and Insurance Board registration. If your corporation has employees (except directors and shareholders) you must register for WSIB.
- Annual Return: A corporation must file its Annual Return with the Government every year to keep it active. You may add Annual Return to your package to avoid the risk of forgetting it. We will take care of it!
Conclusion
Establishing your business in Ontario is a strategic step that is laden with a lot of advantages, such as limited liability protection, tax advantages, growth in credibility, and the ability to raise capital. You will proceed through the steps found in this guide, from selecting the business name that you will use through ongoing compliance, knowing with confidence how to proceed. If you are incorporating federally, provincially, professionally, or have other specialized business sector needs, it is very important to learn about the legal and administrative implications that apply to incorporation. Enjoy the numerous benefits of incorporating in Ontario and align your business for success and growth in a competitive marketplace. Incorporate in Ontario today and tap into the potential for a successful business future that is both prosperous and enduring.
