Incorporating a business is usually highly advantageous for entrepreneurs, but can be a long and complicated process. When a business is incorporated, it becomes legally separate from its owners, and can act independently from them. According to the Entrepreneur website, incorporating a company provides the company with most of the legal rights granted to individuals, with the exception of voting rights.
The biggest advantage of incorporating a business is the limited liability that it brings to the owners. Once a business is incorporated, it becomes a separate legal entity. Any debt that it has or any outstanding loans are the responsibility of the company itself, not its owners. If the company goes bankrupt, the individual finances of the owners are not affected, and any claims against the assets of a corporation are not the responsibility of its shareholders.
However, incorporation comes with enormous amounts of paperwork that, although it is a separate legal entity, the company can’t fill out itself. Owners must constantly document all major activities and transactions made by the corporation. Filing these documents becomes a lot more complicated once the company is incorporated.
In every Canadian province, the laws concerning business incorporation are different. However, you may choose to incorporate under the federal jurisdiction or under a provincial jurisdiction. As a general rule, if your company is active in only one province, incorporate provincially. If it is active in more than one province, incorporate federally. Incorporating provincially is less expensive, but usually takes a lot more time, and has a weaker name protection policy. Furthermore, you will only have to file one set of annual corporate fillings, while you will have to file two on the federal level, making things a little more complicated. Some provinces have unique rules: for example, Quebec is the only Canadian province that has no residency requirements for Directors. In Quebec, here are the steps to incorporating your business:
- Establish the name of your business
If you decide to name your business, the process of incorporation will be longer and more demanding. Provincial laws dictate that the company name be French, but is allowed to have an English version. However, the English version must be a direct translation. You can also number your company: the government will automatically select a number for you, which will greatly speed up the process.
- Designate your head office and company leaders
The company must have a residential or commercial address in Quebec. If it does not, you may have to consider getting a Virtual Office. After your address is set, you must provide the Director of the company, along with his or her personal details: this personal does not necessarily have to be a Canadian citizen. The company must also have officers: the government of Quebec requires each company to appoint a President and a Secretary. Finally you must provide the government with the names and addresses of the shareholders of your company: each company must have between 1 and 50 shareholders.
- Structure your business
You need to provide the government with the number of employees that you have as well as with all of your company’s business activities. Furthermore, all companies must determine, at the time of incorporation, their capital stock structure, restrictions on stock transfer, and limitations on business activities.
Incorporating your business has many advantages, but it must be done right. Before incorporating, consider speaking to a legal expert to make sure you meet of the criteria and that your business is ready for that next step.
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