If you’re starting a business in Canada, you may have heard that incorporating is the only way to go. But what exactly is incorporation? And why should you incorporate it? In this post, we’ll explain that. Also, we will share information on how to incorporate a business in Canada and the benefits of incorporating your business so that you can start your business with these advantages right away!
What is Incorporation?
Incorporation is the process of forming a new legal entity, such as a corporation, limited partnership or limited liability company. Incorporating allows you to take advantage of certain tax benefits and other privileges unique to incorporated entities (i.e., they are not taxed on income earned). However, there are also disadvantages involved in setting up an incorporated business structure in Canada:
- You must file annual returns with CRA as if you were still running your old business until all outstanding debts have been settled
- You cannot use most bank accounts for business expenses unless your accountant has approved these accounts
- There may be restrictions on how much money can be withdrawn from each account per day/month/year depending on where the funds originated from
In addition to these limitations, there are many other reasons why choosing another type of structure may make more sense than incorporating yourself the first time around!
Why Do I Have to Incorporate the Business?
When you incorporate your business, you are able to:
- Protect your personal assets from creditors and other third parties (including the government)
- Avoid personal liability for debts and obligations owed by the company
- Enforceable contracts with suppliers, customers or employees
- The governance structure for the management of your company’s affairs. This can include overseeing day-to-day operations, setting policy standards and hiring/firing staff members based on merit instead of seniority alone. It also gives shareholders control over how they want their shares managed (i.e., voting rights)
Taxation advantages include being able to take advantage of tax deductions related directly back to profit growth through reinvestment activities such as purchasing equipment etc. Legal advantages include having access to legal counsel when making important decisions concerning future strategies involving mergers/acquisitions etc.
What are the Benefits of Incorporating the Business?
Limited liability:
The company is not personally liable for the debts and obligations of its owners.
Tax benefits:
Companies are able to take advantage of tax breaks and deductions that they would not be able to claim if they were individuals.
Capital raising:
In order to grow your business, you may need additional funds in order to hire more employees or purchase new equipment. Suppose you incorporate as a limited liability company (LLC).
In that case, this process becomes much easier because it allows you to raise capital without taking on personal risk by selling shares or bonds directly into the marketplace. Without having them publicly traded on an exchange like stocks do at regular intervals each day like shares do nowadays.
How to Incorporate a Business in Canada?
A business in Canada has many benefits. It can help you expand your business, save on taxes and fees, and protect it from legal challenges. However, there are also some things that must be considered before incorporating your company.
Incorporating a business in Canada is not easy; however, it has advantages over other forms of incorporation. Once you’ve decided to incorporate your company here in Canada and begin the process of doing so (more details below), follow these steps:
- Search for an appropriate province or territory where you would like to incorporate your venture
- Choose between sole proprietorship or partnership entity forms
- Determine whether sole proprietor means a single person with no partners involved or whether it refers to only one member per entity type listed above. If yes, choose partnership entity form because they offer better tax benefits than sole proprietorships while maintaining flexibility when making decisions which could affect overall financial results, such as hiring new staff members at any given time during the development process
Select Corporate Jurisdiction
When you’re establishing your business in Canada, it’s essential to select the appropriate corporate jurisdiction. This is where you will incorporate your company and receive all of its legal benefits (such as limited liability protection).
The first step in selecting a province is determining which one best suits your needs. Several factors can influence this decision:
- proximity to your customers or suppliers
- cost of doing business; and
- the tax rate for companies is based on their location within each province
Select Corporate Name
Before you even begin to consider registering a business name, you should do several things before the process begins. First, check to see if the name is available or not. If not, changing it will cost you some money and time.
Next, check with your provincial and federal governments to see if they have any restrictions on what types of businesses can use certain words as their names or slogans in Canada (for example, “Canada” is prohibited in some provinces). If so, this could mean that your new company would need another name altogether or perhaps an entirely different logo for its promotional materials!
Register Your Corporate Name
The next step to incorporating in Canada is registering your corporate name with the applicable provincial or territorial government.
Suppose you have a business that has been operating for several years. In that case, you must check the availability of your corporate name with the applicable provincial or territorial government. If there are no restrictions on using this type of name, then go ahead and register it.
If not, however, check with each province/territory’s website to see if they offer a registration service where customers can reserve their preferred names before they become available for public use (usually at least 90 days).
Complete the Articles for Incorporate
Once you’ve decided to incorporate your business in Canada, the next step is to complete articles of incorporation. This legal document sets out the structure of your corporation and must be filed with a provincial or territorial government agency. It also must be signed by at least one director before it can be filed with authorities.
The process typically takes 6 months from when a company first comes into existence until it receives its initial certificate from regulators; however, this time frame can vary depending on where you live and other factors, such as how many directors are involved in setting up your business entity.
Submit and Register the Articles of Incorporation
Once you have completed the incorporation process and received your Articles of Incorporation, you must send them to the Corporate Registry. The Corporate Registry looks at these documents to ensure that they comply with all legal requirements before registering them. If there are no issues, then your company will be registered as set out in your Articles of Incorporation.
If there are any problems with your application or information provided on it (for example, if someone has made an error), they may send a letter informing each party involved of their decision and how they would like things corrected or clarified before processing continues further.
Get Your Incorporation Certificate
After submitting your articles of incorporation, you will be given a few days to review the documents before they are processed. This process can take up to 10 business days, but it varies depending on the office’s busyness. Once the team approves you, they will post your company’s incorporation certificate.
The certificate is valid for one year from its issuance date. You must keep this document safe as proof that your company has been incorporated in Canada and is ready for use whenever necessary!
Start Your Business
Now that you’ve completed incorporating your business, it’s time to start.
The first step is to get a business licence from your provincial or territorial government. You’ll need this before doing on-site work (for example, installing equipment). Once you’ve obtained your licence and paid any fees associated with it, start getting everything ready for the new business. This includes:
- Registering yourself as an individual in Canada (for example, through Service Canada)
- Obtaining a federal tax number (TFN) or provincial/territorial number (TIN)
Conclusion
If you’re thinking about incorporating your business in Canada, the first thing to do is to discuss with an experienced accountant how to incorporate and register your business with appropriate government authorities. This will help you decide if this is really something you want to do.
If you follow these steps, we believe that doing so can be a good investment for any company looking for growth and expansion opportunities in Canada!
FAQ – How to Incorporate a Business in Canada
When should I incorporate my business?
When you incorporate your business, you will be able to protect all of its assets from creditors and others who may come after it. This means that if someone sues for payment for work performed or goods sold on behalf of your company, they cannot get access to any money or property without going through you first.
Will I pay less taxes if I incorporate?
Yes, If you’re a small business owner in Canada and you incorporate, then your annual tax bill will drop by about $375 per year. This can be a savings of up to $2,000 over the course of your business’s lifespan.
What is the easiest corporation to start?
A private limited company (aka PLC) is the easiest corporation to start. This type of business has all the same benefits as a public limited company but with fewer restrictions on how it can be managed and operated.
In order to set up as a PLC, you must file an application with your provincial or territorial government. The process varies from province to province but typically involves filling out some forms and submitting them for processing by an accountant or lawyer who will conduct an audit of your finances before approving your application for registration as a private company.
Once registered as a PLC with provincial authorities, there are no further requirements except for annual reporting requirements within specific time frames (usually three months).
Once registered as a private limited liability corporation (PLLC), any shareholder(s) must meet certain qualifications, such as meeting minimum net worth requirements before being allowed access into management roles within their respective organizations–and if they do not meet these qualifications then they cannot become members themselves!
How much does it cost to incorporate a startup in Canada?
The cost to incorporate a startup in Canada is dependent on several factors.
First, you must pay a one-time fee of $300 CAD ($240 USD) and an annual maintenance fee of $100 CAD ($80 USD). As stated before, this is only required if there are any changes made to your company after it’s been incorporated (such as adding employees or changing what type of business it is).
