Thinking about incorporating your business in Canada? Incorporation could be a game-changer, offering legal protection, credibility, and potential tax benefits. Here’s a laid-back, step-by-step guide to help you through the process of incorporating your business as a solo entrepreneur in the Great White North.
Why Incorporate?
Incorporation means creating a separate legal entity (your company) that shields your personal assets from business liabilities. Plus, it can boost your business's image and make tax time a bit easier.
Here is a step-by-step guide to incorporation:
1. Pick a Cool Name
Choosing a business name is more than just picking words out of a hat. It needs to be unique and catchy while following Canadian regulations. The name search is now included in the federal incorporation process, so you don't need a federal Nuans name search report before incorporating. You'll need to choose one that is not already in use, and once you've settled on the perfect name, register it with your province or territory. This step ensures your brand identity is legally protected right from the start.
2. Decide Where to Set Up Shop
Will you incorporate provincially or federally? This decision hinges on your business plans and goals. If you're mainly operating within one province, provincial incorporation might be simpler and more cost-effective. On the other hand, federal incorporation might be necessary if you plan to expand nationally or internationally. Consider your business scope and where you see yourself growing in the future.
Here are a few questions to ask yourself:
Do I plan to expand into other provinces in Canada or Internationally?
Do I need name protection across Canada or just within my province?
3. Get Your Papers in Order
Now, it’s time for the nitty-gritty paperwork. Your Articles of Incorporation are the heart of your business’s legal existence. They outline essential details like your business name, registered office address, the number and types of shares you’ll issue, and other foundational information you'll need to open up a corporate bank account, apply for lending, etc. We recommend using Ownr for a simple share structure, especially if you'll be the sole shareholder of the corporation. It will walk you through the process smoothly and allow you to incorporate for a fraction of the cost compared to using a corporate lawyer. Use our partner link when registering to get 15% off the total registration, and you can also get a rebate if you choose to open up a bank account with RBC, which is a plus.
4. Figure Out Your Shares
Shares aren’t just numbers on paper – they represent ownership in your business. As a solo entrepreneur or if you have a partner, you’ll likely issue common shares. Decide how many shares you want to authorize and their nominal value. This step sets the stage for your ownership structure and future shareholder agreements.
How many shares to authorize:
Start with a higher number of shares: It's common to authorize a large number of shares, such as 10,000 or 100,000. This provides flexibility for issuing shares in the future, whether to attract investors, reward employees, or bring on partners.
Consider your growth plans: If you anticipate significant growth and the potential need to raise capital, authorizing more shares can facilitate these plans without needing to amend your incorporation documents later.
Nominal value of shares:
Set a low nominal value: A nominal value (also known as par value) can be set very low, such as $0.01 per share. This keeps the initial financial burden low while allowing flexibility in issuing shares.
Align with future investments: Setting a low nominal value helps when you need to issue shares to investors or other parties at varying prices based on the company's valuation.
By authorizing a substantial number of shares with a low nominal value, you create a flexible ownership structure that can accommodate future growth and investment opportunities.
5. You’re the Boss
As the entrepreneur you will wear many hats in your company – including director and officer of your corporation. As the sole director, you make the big decisions, while as the officer, you handle the day-to-day operations. Keep in mind any residency requirements for directors based on where you incorporate.
6. File Your Docs
Once your Articles of Incorporation are ready, Ownr will send them electronically directly to your email. This step officially registers your corporation and gives it legal status.
7. Get the Green Light
Depending on your business activities, you might need permits or licenses to operate legally. This could include anything from a basic business license to industry-specific permits. Check with your local authorities to ensure you have all the necessary paperwork squared away.
8. Organize Your Records
Think of your corporate records as the business’s memory bank. Keep all your important documents – like bylaws, shareholder resolutions, and meeting minutes – organized in a corporate records book. This not only keeps you organized but also demonstrates good corporate governance.
9. Tax Time
Incorporation can offer some sweet tax advantages, like income splitting and potentially lower corporate tax rates.
10. Stay On Top of Things
Incorporating your business isn’t a one-and-done deal. You’ll have ongoing
responsibilities, like filing annual returns with Service Canada, keeping minute records, staying informed about changes in corporate law that could affect your business, and ensuring you meet all regulatory requirements to keep your business in good standing. It will be essential to work with a bookkeeper, accountant, and lawyer that you trust to ensure you are continuing to stay compliant with your corporation. At SaltyBooks, we guide you through the process along the way to ensure no steps are missed, saving you from any trouble down the road.
Incorporating your business as a solo entrepreneur in Canada isn’t just about paperwork – it’s about setting yourself up for success. It’s about protecting your personal assets, building credibility with clients and partners, and positioning your business for growth. If you’re unsure about any step along the way, we're here to help you, set you on the right path, and answer any questions you might have.
Are you ready to take your business to the next level? Incorporation could be the key to building a solid foundation for your business. Take advantage of our free 30-minute consultation to discuss your business plans and questions once you're ready to take the next step. Email us at info@saltybooks.ca or text us at 613-702-0808.
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