How to Prepare Your Business for This Important Step

Whether you’re starting a new business or you’ve been in business for a while, you’ve probably thought about incorporating. There are a few steps you’ll need to take and tasks you’ll need to complete before the incorporation process can begin. This article will explain what you need to know along with what needs to take place before you can incorporate your business.

What Does it Mean to Incorporate Your Business?

Whether you are a start-up or a local small business, incorporating your business establishes it as a separate legal entity, owned by its shareholders as opposed to a sole proprietorship or partnerships. Unlike the other business structures, when a corporation is created, each shareholder is issued shares proportional to the percentage of ownership or to comply with tax structures. In Canada, a company may be incorporated provincially or federally.

Benefits of Incorporation

Incorporating your business is a common thing to do because it could limit the shareholders’ and directors’ personal liability for business obligations. Also, because a corporation’s ownership is contained in shares, a corporation is a good choice if you want to attract outside investors. The corporation also exists until it is wound down.

When Is the Ideal Time to Incorporate?

Incorporating a business might seem like the right way to conduct business. However, it is important to take into consideration that Incorporating costs money to set up and then if required to dissolve, and creates additional administrative requirements that sole proprietorships and partnerships don’t necessarily have. It’s recommended that you consider incorporation if:

  • You’re thinking of hiring employees
  • You’re thinking of adding partners or co-owners to the business
  • You’re about to sign a contract
  • You’re worried about liability issues
  • You have discussed the matter with a tax expert

Incorporation can also help your business seem more professional and enhance credibility, which may help you to obtain finances and funding more easily.

Things You Will Need to Know Before Incorporating

These are a few things you need to know before deciding to incorporate your business.

Your Business Name

You can either incorporate your business with a corporate name or a numbered one. A numbered name is assigned by the government, but you can use one or different trade names to conduct business. If you choose a corporate name, there are certain rules to abide by.

Your Business Address

Your business address is the location where you want your business to be incorporated. The head office of a provincially incorporated company must be located in the province of incorporation. By contrast, a federally incorporated corporation could have the head office address in one of the Canadian provinces or territories. Choose your business address carefully, because there could be significant tax consequences and costs associated with changing it.

How Your Business Lawyer Can Help

Incorporation requirements vary from province to province. The guidelines above are general considerations as to what is normally required. Entrepreneurs considering incorporation should seek professional assistance in their jurisdiction to ensure the appropriate steps and documentation meet the requirements under their provincial or federal incorporation act. Our business lawyers at Robinson Business Law have handled over 900 incorporations over the past 19 years and have the knowledge and expertise needed to handle the most complex incorporation cases.

Making the decision to incorporate your business is a big step for a business owner. It can be daunting and confusing even to the most business-savvy among entrepreneurs. Be sure to think through all steps and requirements before making your decision and consider speaking with an experienced business lawyer as well. Receiving guidance from industry experts about the specifics of incorporation can save you a lot of time, money, and effort in the long run.