Learn About Incorporating Your Business in Canada
If you're debating between registering and incorporating your business, take a look at the benefits and downsides of both. Are you ready to take your business to the next level? Contact Telesearch Corporate Services Inc. to find out where to start.
1. Why Incorporate?
An incorporation is considered a legal entity. It can own property, sign contracts, borrow money, sue or be sued or be found guilty of a crime.
Benefits of Incorporation
Lower Tax Rate: The shareholders of a Canadian corporation can receive dividends from the corporation. The income from the dividends is taxed at a lower rate than personal income.
Limited Liability: The liability is limited to the assets of the corporation. This means the shareholders and directors are not responsible for the debts of the corporation. In case of bankruptcy, the shareholders will not lose more than their original investment.
Access to Capital: An established corporation will be able to raise money easier than other forms of business.
Downsides of a Corporation
Accountability: The money the corporation brings in belongs to the corporation, not the directors or shareholders. Income from the corporation has to be accounted for.
Expense: The cost of an incorporation is more expensive than setting up a business registration. In certain circumstances, the directors and shareholders can be held accountable for the Corporation's debts.
2. What Is Required to Incorporate?
NUANS Report: A NUANS report is a requirement for incorporation. This decides if the name is available for incorporation.
To help cut down on the expense of ordering multiple NUANS reports if the name you want is not available, NUANS pre searches are available at no charge to a maximum of 10 searches. After that there is a charge of .50 cents per name.
Prior to requesting a NUANS pre search, you should give some thought to the name you want with three alternative choices in order of preference.
If you decide a number corporation is preferred, a NUANS report is not required.
Registered Office Address: It can be your home address, business address or address where your records are kept. It cannot be a PO Box number. Your mailing address can be a different address.
Director(s): Names and addresses of the directors for the new corporation, i.e. one or more individuals who will manage the corporation.
If Ordering a Minute Book: Shareholders:Names and addresses of the shareholders and percent of ownership (usually the directors).
3. Why Register Your Business?
Take a look at the benefits and downsides of registering your business as a sole proprietorship, partnership or operating name.
A sole proprietorship or partnership is fairly inexpensive to register.
The partnership has the talent and energy of two or more owners.
If there is a business loss, that loss can be carried to the owners' personal tax return and reduce their taxable income.
An operating name is an inexpensive way for an incorporation to start another business and retain the benefits of a corporation.
Downside to Business Registration
The business income is considered personal income, which is taxed at the owners' personal income tax rate.
Owners have unlimited liability which means in a court case they are being sued personally. Their personal assets are at risk.
In the case of a partnership, each of the partners is liable for each other. If one partner makes a bad decision or cleans out the bank account and leaves the country, the other partner is responsible for all debts.
4. How to Register a Business Name?
A Master Business Licence is a certificate issued by the Ontario Companies Branch. This is required to open a bank account for a sole proprietorship, partnership, or operating name for a corporation.
A NUANS name search is voluntary; it is not required for business registrations. When you have chosen a name, it should be checked using the NUANS pre search for availability. There is no charge for the first ten pre searches, .50 cents per name afterwards. The pre searches will inform you if there are any corporations, trademarks, or other business names similar to your preferred name.
The Ontario fee to register the business name is $60.00.
Contact Telesearch Corporate Services Inc. to get the registration process started.
5. Should I Start an Ontario Corporation or a Canada Corporation?
Corporate Jurisdiction: Your new corporation can be a Provincial or Canada Corporation. This has to be decided prior to doing the NUANS report.
The process for an Ontario corporation (online filing Ontario fee of $328 or $360 at a Land Registry Office) is to view the NUANS report. Assuming the name is available, then register the Articles of Incorporation, enter the names and addresses of the incorporators/directors and file the Initial Return confirming the head office address, directors and officer positions (President, Secretary, Treasurer). This can be registered same day quite often within an hour.
For a Canada corporation, the NUANS is sent to an examiner who rules if the name is available. A name for a Canada corporation can me more difficult to obtain. It is being compared to every business & corporation name across Canada. This process can take 2-3 days. Assuming the name is acceptable, the articles are filed with the names and addresses of the directors & head office. Usually by the fourth day the Certificate of Incorporation is issued. It is not unusual to have to do another NUANS report to accommodate the Federal Examiner.