Incorporating a business involves completing several steps while ensuring compliance with both provincial and federal laws. Incorporation creates a legal entity distinct from its owners.
Why Incorporate a Business in Ontario?
Incorporating your business in Ontario offers several advantages:
- Limited Liability: As a separate legal entity, your personal assets are protected from business debts and liabilities.
- Tax Benefits: Depending on your business structure and revenue, you may be eligible for various tax deductions and credits.
- Credibility and Professionalism: Incorporation can enhance your business’s credibility and make it more attractive to potential clients and investors.
- Easier Access to Financing: Banks and investors often prefer to deal with incorporated businesses, as they view them as more stable and established.
- Perpetual Existence: An incorporated business can continue to exist even if ownership changes.
How to Incorporate a Business in Ontario
Here’s a general overview of the steps involved in incorporating a business in Ontario:
- Choose a Business Name:
- Select a unique name that complies with Ontario’s naming regulations. You can either:
Use a numbered name (e.g., 1234567 Ontario Inc.), which is a default option provided by the government, or,
Choose a distinctive name that reflects the nature of your business (e.g., ABC Solutions Inc.)
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- Check the availability of your chosen name through the Ontario Business Registry.
- Decide on the Type of Corporation
The business could be incorporated as either:
- Federal Incorporation: If you plan to operate the business in multiple provinces or across Canada.
- Provincial Incorporation: If your business will operate primarily in Ontario.
- Determine Your Business Structure:
- Decide on the most suitable structure for your business, such as a corporation or a limited liability company (LLC).
- Prepare Necessary Documents:
- Articles of Incorporation: This document outlines the basic information about your corporation, including its name, address, directors, and share structure.
- Initial Return: This form provides details about your corporation’s directors, officers, and initial shareholders.
- File Your Documents:
- You can file your documents online through the Ontario Business Registry or by mail.
- Pay the required fees.
- Obtain a Business Number (BN):
- Apply for a BN from the Canada Revenue Agency (CRA) to identify your business for tax purposes and to access various government services, including filing taxes, remitting HST/GST, and paying payroll deductions.
- Set up Corporate Records
- As an incorporated entity, you will need to prepare and maintain a minute book which is a physical or digital binder that contains the key records for a corporation.
- Obtain Necessary Licenses and Permits:
- Depending on your industry and location, you may need various licenses and permits from federal, provincial, and municipal authorities.
- Open a Corporate Bank Account
- After incorporation, you will need to open a corporate bank account for your business distinct from your personal accounts.
- Issue shares to Shareholders
- As a corporation, you will need to issue shares to the shareholders. These shares represent ownership in the company. The number and type of shares and rights associated with them must be outlined in the Articles of Incorporation.
- Shares can be issued to individuals or entities and must be documented in the corporation’s shareholder register.
- File Annual Returns and Maintain Corporate Records
- Corporations in Ontario are required to file an Annual Return with the Ministry of Government and Consumer Services each year which is separate from the corporation’s income tax return. This filing updates the government on any changes to the corporation, such as changes in the directors or registered office address.
Additional Considerations:
- Legal and Professional Advice: Consult with a lawyer or accountant to ensure compliance with all legal requirements and to get personalized advice.
- Ongoing Compliance: After incorporation, you’ll need to maintain your corporate records, file annual returns, and comply with ongoing tax and regulatory obligations.
Helpful Resources:
- Ontario Business Registry: https://www.ontario.ca/page/ontario-business-registry
- Canada Revenue Agency: https://www.canada.ca/en/revenue-agency.html
- Service Ontario: https://www.ontario.ca/page/serviceontario
By following these steps and seeking professional advice, you can successfully incorporate your business in Ontario and set it up for long-term success. At Inch Hammond, one of our lawyers may be able to assist.
Disclaimer: The information in this article is for general informational purposes only and does not constitute legal advice. It is not intended to create a lawyer-client relationship. Please consult a qualified professional for advice on your specific situation.
