There are various reasons that can make you start a business. For instance, you may start one to follow your passion, want financial independence, or desire control over your schedule or lifestyle. You may also start your business because of the job security that comes with it as well as tax benefits. Learning how to incorporate a business is an important skill to learn.
When starting a business, you can either form a corporation or a sole proprietorship. A sole proprietorship is a business type whereby an individual owns and controls the whole company or organization. A corporation, meanwhile, is owned by a group of people that has been recognized as a single entity by the state. In such a business type, the corporation’s board is held liable for its finances and actions, not its shareholders.
The steps used to incorporate a business differ between states and countries. You can incorporate a business in Ontario by following the outlined steps in this article.
How To Incorporate A Business In Ontario
Below are the steps used when incorporating a business in Ontario:
Choose A Name For Your Company
The company name you select matters a lot. A name gives your business a distinct personality, thus making it easier for your customers to identify your business. A good name can also help in attracting more potential customers.
In Ontario, there are two options for naming your company. You can go with a numbered company or a company name. An example of a numbered company name is 45678 Ontario, while a company name can be Linda’s Plumbing Services, Ontario.
However, if you decide to use a company name, there’s a possibility another company has a similar name. Therefore, conduct a name search using the Newly Upgraded Automated Name Search (NUANS®). NUANS® is a computerized system that uses the existing database to compare your business name with other reserved names and trademarks. You need to create another name if your business name is similar to existing company names.
Work On Your Documentation
Incorporating a business in Ontario will require a document known as the Articles of Incorporation. The Articles of Incorporation will contain various information about your company. Some of these include your business name and address, the kind of activity your business will be doing, the name and address of every director, a NUANS® report not older than 90 days, and the name and address of every shareholder.
When providing these details, ensure you do a thorough job. Hire an experienced lawyer to take you through the process to ensure you don’t make any mistakes. That’ll save you a lot of time, hassle, and money that you could have used repeating this process if you make mistakes.
Submit All Necessary Documents
There are two ways you can submit your documents. The first option is to take them to a government office. The other option is to submit them electronically. If you submit your documentation manually, you must have two copies of your Articles of Incorporation. Before presenting these copies, have the incorporators sign them. You must also provide a cover letter containing your name and information contact or that of the person filing your company’s document.
On the other hand, if you opt to file electronically, you must prepare CAD$360. This money is the fee paid to the third-party processors that file the Articles of Incorporation for you electronically. In addition to this fee, you may pay more for the service fee since completing incorporation is done on your behalf. However, how much you pay as a service fee varies depending on the third party whose services you’re using.
Get A Corporate Minute Book
After you successfully incorporate your business, you’re required to have a way you can show the ongoing business of your corporation. You can do so by using a corporate minute book. A corporate minute book entails various records of your corporation.
Some records include corporate by-laws, securities registers, copies of the Articles of Incorporation, directors’ registers, shareholder resolutions, share transfer registers, and minutes of shareholder meetings. Furthermore, you can add copies of any forms filed with the government and unanimous shareholder agreement. Note that these are just some records you can have in your corporate minute book. You can add any document that can be used to reflect ongoing businesses in your corporation.
Benefits Of Incorporation
Now that you understand the above steps of incorporating a business in Ontario, you can learn how you benefit from incorporation. Here are some of the advantages of incorporation:
Reduced Or Limited Liability
Nothing is guaranteed in the business world. Over time, things can go south, and your business may make losses or be in significant debt. Whoever is held accountable for these debts depends on your business type. If you’re a sole proprietor, you’ll be held liable. However, an incorporation is an entity that’s held responsible for liabilities. As a result, you won’t have to use money from your personal pocket.
The life of your business depends on who’s controlling it. If you’re a sole proprietor, you must have a clear plan for succession in case you no longer have the capacity to run your business. Luckily, with corporations, the owner’s absence doesn’t affect how the company is operated. That is because a corporation is an entity with a structure that guides its functions.
Various tax laws dictate the type of taxes you’re obliged to pay. For instance, if you’re a sole proprietor, you’re required to pay personal income taxes. These taxes have a higher rate than the taxes paid by corporations. By incorporating your business, you avoid hefty taxes since corporations are taxed under a different tax bracket.
Increased Access To Financing
Sometimes you may want to expand your business but don’t have the needed funds. At such a point, one of the options is outsourcing finances. However, some companies may be reluctant to work with businesses that aren’t corporations. This is because investing in corporations is considered less risky than in sole proprietorships since the chances of a corporation failing are minimal compared to sole proprietorships. Moreover, for this reason, corporations are financed at lower interest rates than other business types.
Summing Up On How to Incorporate a Business
There are various reasons that can lead you to start a business. You can either create a sole proprietorship business or a corporation. If you choose the latter, there are steps that you follow when incorporating your business. These steps differ depending on the location you want to start your corporation. This article discusses the steps used in incorporating a business in Ontario. Therefore, if you’re planning to start a corporation in Ontario, you can use the information above to guide you.