The act of incorporating creates a new legal entity called a corporation, commonly referred to as a “company.” A corporation has the same rights and obligations under Canadian law as a natural person.
Corporate Name Search
We help businesses name and register their corporation, no matter where a company plans to incorporate or operate in Canada. Before approving a new corporate name, most provincial and territorial governments require a Nuans report. The Nuans report is a list of existing corporate and business names, as well as trademarks, that are similar to the one being proposed. A Nuans report helps avoid choosing a name that is already in use.
Being a Nuans member we can assist you with:
• ordering your Nuans report
• choosing a name
• understanding policy and regulation requirements.
Benefits of Incorporating
No matter where you choose to incorporate, incorporation offers many benefits to your business, including:
• creation of a separate legal entity
• limited liability
• lower corporate tax rates
• better access to capital and grants
• continuous existence.
Separate legal entity
The act of incorporating creates a new legal entity called a corporation, commonly referred to as a “company”. Your corporation will have the same rights and obligations under Canadian law as a natural person. Among other things, this means that it can acquire assets, obtain a loan, enter into contracts, sue or be sued, and even be found guilty of committing a crime. Your corporation’s money and other assets belong to the corporation and not to its shareholders.
Limited liability:
Incorporation limits the liability of a corporation’s shareholders. This means that, as a general rule, the shareholders of a corporation are not responsible for its debts. If your corporation goes bankrupt, your shareholders will not lose more than their investment (except shareholders who have provided personal guarantees for the corporation’s debts). Creditors also cannot sue your shareholders for the corporation’s liabilities (debts), even though the shareholders are the owners of your corporation.
However, if a shareholder has another relationship with the corporation (for ex., as a director), there are circumstances when this person can be liable for the debts of the corporation. In other words, the person would not be liable for the corporation’s debts as a shareholder, but as a director. Under the CBCA, directors have a number of duties and liabilities. For example, it says that directors can be held liable for certain acts or for failure to act.
Lower corporate tax rates:
Corporations are taxed separately from their owners. Because the corporate tax rate is generally lower than the individual tax rate, incorporation can offer you some fiscal advantages. Consider consulting a lawyer or an accountant to help you assess whether incorporating might save you money. In fact, your accountant will likely recommend incorporation once your revenues reach a certain point.
Better access to capital and grants:
Raising money is often easier for corporations than it is for other forms of business. For example, your corporation would have the option of issuing bonds or share certificates to investors. Other types of businesses must rely solely on their own money and loans for capital. This can limit the ability of your business to expand.
Corporations are also often able to borrow money at lower rates than the rates offered to other types of businesses. Financial institutions and others tend to see loans to corporations as less risky than those given to businesses that are not incorporated.
Continuous existence:
Your corporation would continue to exist even if every shareholder and director were to die. In these circumstances, ownership of the corporation would simply transfer to the shareholders’ heirs. This is not the case for partnerships or sole proprietorships, which cease to exist on the death of their owners. This greater stability would allow your corporation to plan over a longer term. It also helps in obtaining more favourable financing.
Advantages of Incorporating Federally
While incorporation offers benefits no matter where you incorporate, federal incorporation offers additional advantages.
• Use of your name across Canada
• Location flexibility
• Recognition
Use of your name across Canada:
Federal incorporation means you can operate your business using your corporate name right across Canada. This is important if you decide to expand your business to other provinces or territories. Note that the Province of Quebec can require that a French version of the name be registered.
Location flexibility:
Incorporation under the CBCA gives you flexibility in choosing a location for your business. This flexibility is not always available under the legislation of other Canadian jurisdictions. For example, the legislation sets no restrictions on the province or territory where your registered office can be located. Nor does it dictate where to hold annual meetings. In fact, you can even hold annual meetings electronically or outside of Canada.
Recognition:
Federal incorporation is a sign of distinction. Corporations incorporated under the CBCA are recognized around the world as Canadian corporations. This is an important consideration if you are incorporating a business that will have customers outside Canada.