Are you planning to open a corporation in Ontario? Understanding how to open a corporation in Ontario can save you time and money.
There are many reasons why you might want to open a corporation. Perhaps you are starting a new business or expanding an existing business. Maybe you are looking for ways to protect your personal assets from liability. Whatever the reason, it is important to understand the process of how to open a corporation in Ontario so that you can get started on the right foot.
Here’s a detailed step-by-step process on how to start a corporation in Ontario:
Choose Corporate Jurisdiction
In Ontario, you can choose to register your corporation federally or provincially. If you are doing business only in Ontario, it is usually best to incorporate provincially. This will save you the hassle and expense of setting up a separate corporation for each province in which you do business.
Provincial corporations are registered with the Ontario Ministry of Government and Consumer Services. Incorporating your company in just one province or territory provides you with corporate name protection. But if you’re expanding your business in other provinces let’s say two (2) or more, then this will be an issue. In this case, a federal incorporation might be a better option for you.
To register a corporation federally, you will need to file incorporation documents with Corporations Canada, which is part of the Canadian government. Federal corporations in Canada are authorized to operate anywhere in the country by the Canada Business Corporations Act under their corporate name.
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Come up with a corporate name.
Once you have decided which level of government you want to register your company with, you will need to choose a corporate name. The name must be unique and not already in use by another corporation. It also cannot be too similar to an existing registered trademark.
When choosing a name for your corporation, keep in mind that you may want to operate under a different name in the future. For this reason, it is best to choose a name that is broad enough to allow for expansion.
Corporations Canada requires that all proposed names for a corporation consist of descriptive and distinctive elements. These can be anything from individual letters or an acronym, but four-five character lengths are necessary in order to meet these criteria.
While there are many ways to make a business name stand out, some elements can be more distinctive and descriptive than others. Here are a few ideas to get you started:
- Alliteration: Using the same letter or sound at the beginning of multiple words can create a catchy, memorable effect, as in Coca-Cola or Krispy Kreme.
- Rhyme: Like alliteration, rhyme can help people remember your business name better. Bed, Bath & Beyond and Dunkin’ Donuts are two examples.
- Descriptive words: Sometimes simply describing what your business does in the name can be effective (and efficient). Think of companies like UPS or FedEx.
Pro tip: Make sure you include some creativity when designing your company’s logos!
Difference Between Trademark and Business Name
There is a big difference between a business name and trademark. A business name is just the name that you choose to give your company or product. You can change it at any time, and anyone can use it as long as it isn’t already being used by someone else.
On the other hand, a trademark is a government-regulated form of intellectual property protection. It encompasses things like logos, slogans, and other branding elements that help distinguish your business from others in the marketplace.
Once you’ve obtained a trademark registration, you have exclusive rights to use it in connection with your goods or services. So if you’re looking to protect your brand identity, trademarks are the way to go.
You can search the records of both federal and provincial corporations to see if your desired name is available. If it is not, you can reserve the name for a small fee.
Complete Incorporation Documents or Articles of Incorporation
The next step in how to open a corporation in Ontario is to complete the necessary incorporation documents. These will vary depending on whether you are incorporating federally or provincially.
Articles of incorporation in Canada are the formal documents that set out the rules and regulations for a new corporation. This includes specifying the name of the corporation, the purpose of the corporation, the address of its registered office, and the names and addresses of its directors. Articles of incorporation must be filed with your provincial government in order to create a legal entity.
If you are incorporating federally, you will need to complete the following documents:
- Articles of Incorporation
- NUANS Report
- Notice of Registered Office
- Initial Registered Directorship Statement
- Statement of Compliance
You can find all of these forms on the Corporations Canada website.
If you are incorporating provincially, you will need to complete the following documents:
- Articles of Incorporation
- NUANS Report
- Initial Registered Office Address and Directors Statement
You can find these forms on the Ontario Ministry of Government and Consumer Services website.
Prior to completion of the Articles of Incorporation, the incorporators have to specify the following details:
- Location of the registered business or office
- Number and classes of shares the company will issue (common or preferred)
Shares are fractional ownership interests in a company. Different types of share classes exist, each with its own set of rights and privileges. The most common type of shares are common shares, which typically give their owners the right to vote on corporate matters and receive dividends.
Preferred shares are a type of stock that gives their owners preference in terms of dividends and asset liquidation. Preferred shareholders typically do not have voting rights, but they may have some say in major corporate decisions if they hold a large enough stake in the company.
Class A shares are a type of common stock that typically have more voting rights than other types of common shares. Class A shares are often issued to company insiders, such as founders and executives, and they may be subject to different rules than other types of shares.
It’s important to understand the rights and privileges associated with each type of share, as well as the risks involved. Different types of share classes can be suitable for different investors, depending on their goals and objectives.
- Restrictions or constraints on share transfers
- Minimum or maximum number of directors to be appointed (resident & non-resident)
The Ontario government has passed a new law that removes the requirement for directors of corporations incorporated in this province to be Canadian citizens or residents. Effective July 5 2021, non-Canadians will now have access to incorporate with their own board members (instead of having them find another resident Canadian).
The term “resident Canadian director” also includes an individual who is a member of a partnership that is a shareholder of the corporation, as well as an individual who is a shareholder of a trust that is a shareholder of the corporation.
- Restrictions on the types of business or activities that will be conducted
- Other restrictions during business operation
If you are thinking about what NUANS reports are, well these are basically a due diligence tool that is used in Canada during corporate searches. It’s a search of corporate and business names that have been filed with provincial, territorial and federal governments. The report will list any names that are similar to the name you’re searching for, which helps you to choose a unique name for your business.
You can obtain a NUANS report by contacting the Canadian Intellectual Property Office.
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File Documents and Pay Fees
Once you have completed the incorporation documents, you will need to file them with the appropriate government office along with the required filing fee.
The filing fee for a federal corporation is $200. The filing fee for a provincial corporation is $360.
After your incorporation documents have been filed, you will receive a Certificate of Incorporation. This document is proof that your corporation has been created and is now officially registered.
Complete By-Laws, Corporate Minute Book and Shareholder Agreement
By-laws are the rules that govern how your corporation will be run. They set out things like the powers of the directors, the method for calling shareholder meetings, and the procedures for amending the by-laws themselves.
While you are not required to have bylaws in place when you first incorporate your company, it is a good idea to do so. By-laws provide clarity and structure for running your corporation and can help prevent disagreements down the road.
You can find template by-laws on the Ontario Ministry of Government and Consumer Services website.
Once you have completed your by-laws, you will need to sign a shareholder agreement. This document sets out the rights and responsibilities of the shareholders of your corporation.
The shareholder agreement should be customized to fit the specific needs of your corporation. It can cover things like how shares can be transferred, what happens if a shareholder dies, and what happens if the corporation is sold.
Obtain Business Licenses and Permits
Depending on the type of business you are in, you may need to obtain certain licenses and permits before you can start operating. These will vary depending on the province or territory in which you are doing business.
Some of the permits and licenses you need to secure include:
- A business license from the City of Toronto
- A Certificate of Incorporation from the Ontario government
- A Business Number from the Canada Revenue Agency
- Workplace Safety and Insurance Board clearance certificate
- any other industry specific licenses or permits that may be required.
You can find out what licenses and permits you need by contacting your local Chamber of Commerce or Small Business Development Center.
Open a bank account
Once you have incorporated your company, you will need to open a bank account in its name. This account will be used to deposit funds earned by the company and to pay any expenses incurred.
To open a bank account, you will need:
- Your Certificate of Incorporation
- Your business license
- Your business number
- Proof of address for your business
When opening a bank account, you will also be asked to choose a signatory for the account. The signatory is the person who has the authority to withdraw funds from the account and write checks on behalf of the company.
You will also need to choose a company name and registered address. The registered address is the address where your company’s official records will be kept.
After you have chosen a name and registered address, you can file the appropriate paperwork with the government.
Secure a Legal Advisor
It is a good idea to have a legal advisor on retainer who can help you with the day-to-day operations of your company. Your legal advisor can help you with things like drafting contracts, negotiating leases, and understanding government regulations.
Having a legal advisor on retainer will save you time and money in the long run. It will also give you peace of mind knowing that someone is there to help you if you have any legal problems
You can also get insurance for your business. It is important to get insurance for your business to protect yourself from liability. Depending on the type of business you are in, you will need different types of insurance.
Some of the common types of insurance include:
- Product liability insurance
- Property insurance
- Business interruption insurance
- Professional liability insurance
Start your business!
You are ready to start doing business! Remember to keep your shareholders informed of the progress of your company and to stay up-to-date on the latest news in your industry.
Now that you have incorporated, you may consider developing a business plan next!
This will help you determine the overall direction and goals for your business. It should include a marketing plan and financial projections. Once everything is in place, you can begin opening up your doors for business!
There are many things to consider when starting a corporation in Ontario. But by taking the time to do your research and planning ahead, you can set your business up for success from the start. If you are not positive about doing the process correctly, don’t hesitate to leave the job to our professional accounting firm in Toronto. At FShad CPA, we have a team of qualified CPAs who are always ready to give a helping hand. Schedule your appointment today!