Incorporating is a natural next step for many sole proprietors and partnerships. A corporation is a separate legal entity, which can help separate business liabilities from your personal assets and may open tax planning options. To incorporate a business in Ontario properly, these are the decisions and documents to work through.
1. Provincial or Federal Incorporation
An Ontario corporation is governed by the Business Corporations Act (Ontario); a federal corporation by the Canada Business Corporations Act. Federal incorporation offers broader name protection across Canada but still requires extra-provincial registration where you carry on business. Your plans for growth help decide which is right.
2. Choose a Name or Use a Number
You can incorporate with a distinctive name, which requires a name search report, or as a numbered company and register an operating name later.
3. Design the Share Structure
Decide the classes of shares, their voting and dividend rights, and who will hold them. A well-planned structure makes it easier to bring in partners or family members later.
4. File Articles of Incorporation
Articles set out the corporation's name, registered office, number of directors, share classes and any restrictions. Once filed, you receive a Certificate of Incorporation.
5. Organise the Corporation
- Pass by-laws and organisational resolutions.
- Appoint officers and issue shares.
- Set up the minute book and registers of directors, shareholders and individuals with significant control.
- Register for a CRA business number, HST and payroll accounts as needed.
6. Sign a Shareholder Agreement
If there is more than one shareholder, a shareholder agreement sets out decision-making, funding, share transfers and exit rules. It is one of the best ways to prevent future disputes.
7. Keep the Corporation in Good Standing
File annual returns, update the minute book after major decisions, and record changes to directors and shareholders promptly.
Next Steps
Every business is different, and the right structure depends on your goals. Learn more about our corporate law services or book a consultation with Arthur Liangfei Tan.
This article is general information and not legal advice.
Arthur Liangfei Tan is an Ontario lawyer with Sun Law Professional Corporation. He advises sole proprietors, corporations, property buyers and families on business, real estate and personal legal matters. Read full profile.
