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How to incorporate a business

 The legal form of business you choose is crucially important because it affects the entire nature and structure of your business. A lawyer is a great resource because he or she can help you decide whether you should incorporate, and if you are incorporating, which corporate structure will best suit your needs. Prior to registering your corporation, you will need to choose a corporate name, draft your Articles of Incorporation, and submit a processing fee. The following is a cursory overview of the process.

Corporate name

First, you need to choose a corporate name. If you do not want to choose a name, you can simply use the corporate number that has been assigned to you by the Ministry of Government Services. If you ultimately decide to use a corporate name, you have to ensure that another company is not using your potential corporate name. You can do this by completing a New Upgraded Automated Name Search name search. The NUANS name search has a nominal fee; however, you will receive a report that outlines all the businesses and trademarks that have names similar to the one you are proposing to use. You must submit the NUANS report to the Ministry along with the rest of the application requirements.

Articles of incorporation

Second, you must draft the Articles of Incorporation. The Articles of Incorporation is a legal document that outlines important information about the structure of your corporation including the minimum and maximum number of directors your corporation is allowed to have, the different classes of shares, and the names of the incorporating directors.

Should the business be incorporated federally or provincially?

Third, you will need to decide whether your business should be incorporated federally or provincially. It might be best to incorporate your business under federal law if it will be located or operate regularly in more than one province or in foreign countries. A federal incorporation will allow you to carry on business in all Canadian provinces without a special licence. Nonetheless, a simple registration might still be legally required in some Canadian provinces.

If you have intentions to operate mainly in one province, then a provincial incorporation might be the best option for you. If you choose to do business in another province, however, you might have to register your business there and you may even be required to obtain an extra-provincial licence.

You will most likely require a lawyer to register your corporation in a province outside your place of residence. Additionally, some jurisdictions have residency requirements. Most Canadian laws require that the majority of the directors of a corporation be Canadian residents. The federal business law legislations have been recently amended to reduce the Canadian residency requirement for corporations in most industry sectors to 25%, except where there are fewer than four directors, in which case at least one director must be a resident Canadian.

In Ontario, the majority of the directors must be resident Canadians. As such, if the corporation has only one director, then that director must be a Canadian resident. If the corporation has two directors, then one of the directors will have to be Canadian.

There is a possibility that permanent Canadian residents who are not yet citizens may be able to qualify as resident Canadians.

Foreign investors can navigate the residency requirement issue by finding Canadians to represent them on the board of the company. The province of Ontario allows "unanimous shareholder agreements" to be established, which transfer the power of the managing directors to the shareholders.

Filing for incorporation

If you want to incorporate a business in Ontario, you will have to submit the following items to the Ministry of Government and Consumer Services, Companies and Personal Property Security Branch:

  • Two copies of the Articles of Incorporation
  • If you are not using the assigned number name, then the NUANS report for the proposed name, which must be submitted within 90 days of when the NUANS report was generated
  • A cover letter including the name, telephone number, and return address of a contact person
  • The required fee

You can file your Articles of Incorporation by mail, in person, or online. You should always ensure that you have your own copy of all the documents that you submitted just in case there is a processing problem. When the Ministry completes the registration of your corporation, it will issue a corporation number and provide you with a certified copy of the Articles of Incorporation.

Issuance of shares, bylaws, and minute books

After the incorporation is complete, shares must be issued from the treasury. The number of shares, class of shares, and the people purchasing the shares are unique to each corporation. Once the shares have been issued and purchased, the shareholders can then elect directors. Following this, the elected directors can then appoint officers. During the first meeting, the bylaws of the corporation and decisions regarding the bank that the corporation will use and which accountant will be retained must be voted on and passed.

Finally, the law mandates that all corporations must maintain minute books. The minute book must contain documents such as minutes of important meetings, the bylaws, the directors', shareholders', and officers' registers, and a copy of the Articles of Incorporation. The minute books may also contain other important documents such as copies of loan documents and government filings.

Filing required after incorporation

After your company has been incorporated and its associated affairs have been organized, you will then be required to file a Form 1 Initial Return / Notice of Change form with the ministry. The ministry uses this form to obtain further information such as the names of the directors and officers of the corporation, confirmation of the head office’s address, and all mailing addresses of the corporation. You should contact a lawyer if you require more specific information or professional assistance with the incorporation process.

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Ontario Ministry of Government Services