Running a business without proper legal protection can put your personal assets at serious risk. Indeed, several Ontario entrepreneurs do not realize this until it is too late. As a result since you can be personally liable, your home, vehicle and savings might be confiscated to settle business debts.
You also enjoy tax benefits, gain tremendous credibility amongst the clients, and get easier access to funding.
Want to know more about incorporating in Ontario? Keep reading!
This blog will walk you through the five simple step-by-step processes to incorporate a business in Ontario. These steps will help you know how to do it right the first time, whether it’s a new business or you are formalizing an old one.
Step 1: Choose Your Business Structure
First, before you incorporate in Ontario, it helps to know the difference between it and other business structures.
For example, a sole proprietorship associates the business with you. Any debts are personal to you. A partnership works similarly, with the only difference being that the risk is split among other individuals.
On the other hand, an incorporation establishes a separate legal entity (a corporation). The benefits of such a division include the following:
- Limited Liability: You are not liable for the debts of your business or legal proceedings involving your personal property. In case your business folds, you still retain your house.
- Tax Flexibility: Corporations have individual taxation. You benefit from lower taxes as a small business, and can choose how to pay yourself (salary or dividends) to save money.
- High Credibility: Adding Inc. or Ltd. indicates to clients and lenders that you are serious.
When you incorporate a business in Ontario, you are subject to its provincial laws. Moreover, it is also frequently cheaper and faster than the federal incorporation. Perfect when you plan to work only in this province.
Step 2: Choose and Register a Business Name
Your business name is your identity. In Ontario, your business name should be distinct, and it should have Incorporated, Limited, Corporation or their short form initials (such as Inc., Ltd, Corp.) at the end of the name. However, it should not be excessively close to the existing corporations or trademarks.
That said, you need a NUANS (Newly Updated Automated Name Search) report to verify your name availability. This search scans a database of company names and trademarks to find conflicts. It is a mandatory report that the best company incorporation services in Ontario can conduct.
If your name is not accepted, you have to begin anew. It is best to have alternative names.
The best tips on naming include the following:
- Keep it simple: Select something easy to remember and spell.
- Be descriptive or abstract: Let it reflect what you do ( Ottawa Home Renovations Inc.) or create a brand ( Zenith Solutions Ltd.)
You may omit this and adopt a numbered corporation (such as “123456789 Ontario Inc). It’s faster and cheaper. Then trademark an operating name.
Step 3: Prepare Incorporation Documents
Following the securing of your name, you must prepare your legal paperwork. There are certain forms that you must fill in correctly.
For example, here are the key documents you’ll need:
- Articles of Incorporation (Form 1): This is your corporation’s primary document. It contains your legal name, your registered office address in Ontario, share structure (such as ordinary shares), restrictions on transfer of shares, and the number of directors.
- Initial Registered Office Address and First Board of Directors (Form 2): This form lists the official address of your corporation and the names and addresses of your first directors.
- NUANS Report: Your name search report is seven pages long. It must be less than 90 days old when you file.
These forms may seem overwhelming. But they simply mention the corporation’s structure and leadership. Nowadays, it has become a far more straightforward process. Register all that online with the Ontario Business Registry or engage a service to handle everything for you.
Step 4: File for Incorporation
Now, your next step is to make your business official once you have prepared your documents.
The process moves fast. Online filings may take 1-2 working days, or even one hour under a rush service. On acceptance, you get a Certificate of Incorporation. It is a testament that you are a legal corporate entity.
Step 5: Finish Post-Incorporation Requirements
Finally, getting your Certificate of Incorporation is a significant milestone. However, a few more steps will keep you within the law.
Research determined that modern founders were more interested in developing well-governed businesses at an earlier stage. A good post-incorporation set-up is critical.
Here’s your checklist:
- Prepare a Corporate Minute Book: Keep articles and bylaws, and share certificates here. This is a law requirement, and it comes in most incorporation packages.
- Issue Shares: Issue shares to the owners formally as per your articles.
- Register Your Business Number (BN): Get this 9-digit number from the Canada Revenue Agency (CRA) for your tax returns.
- Register Tax Accounts: Register GST/HST (that includes over 30,000 income), Payroll (employees), and 109 corporate income tax. We can help with this.
- Open a Corporate Bank Account: Get a special account. Never confuse business and personal money.
- Register Licenses and Permits: Research what is required of you locally, provincially or federally.
Additional Tips for New Business Owners
You’re not done yet. The following are some additional tips that you should consider when incorporating a business in Ontario:
- Seek Expert Advice: An attorney or accountant could be a good idea. They will advise you on share structures, tax planning, and compliance, saving you future headaches.
- Separation of Finances: This should be done by always using a corporate bank account to manage all business income and expenditure. This strengthens the limited liability shield and eases the process of bookkeeping.
Conclusion
Incorporating your business in Ontario is a strong move for a secure and scalable future. Thus, the five steps shared above will guide you through the process smoothly.
Overall, incorporating in Ontario might seem complicated, but following the above-mentioned steps or using a third-party incorporation service can help set you up for sustainable growth and success.
