To Incorporate or Not to Incorporate
The decision to establish either a sole proprietorship or a partnership is driven, to some extent, by the particular circumstances of the owner(s). This is not necessarily the case, however, with incorporation, which brings your business to an entirely different level. For the advantages you gain by incorporating, you might lose something you valued in the other business models. Here again, the informed decision is likely to be the best decision.
Is Your Business Best Served by Incorporation?
There are many websites with information about incorporating, including those of the federal and provincial governments, but they will suggest that you consult a lawyer for clarification and specific legal advice. The Government of Canada’s website, for example, warns, “Corporations Canada staff does not provide legal advice. Staff will only advise clients with regards to whether or not a filing will be accepted”.
In order to decide if incorporating is a good fit for you personally and whether or not it will best serve your business, as well as to ensure that your venture has every possible opportunity to succeed, follow the government’s recommendation and obtain the advice of a lawyer. Choose one with a strong background in business and corporate law: a preliminary consultation with Howard Nightingale can help you decide whether or not you and your business will be best served by incorporation.
What Would Be Discussed at an Initial Consultation?
Howard Nightingale tailors the discussion to the client’s needs. For example, someone considering a first entry into an incorporated business will likely want to start with basic considerations such as:
- Incorporation eligibility
- Whether to incorporate federally or provincially
- A review of the advantages and disadvantages of incorporation
- Determining whether sole proprietorship or partnership might be a better fit
- Explaining the process of incorporation
At this point the client should be better equipped to determine whether to incorporate or to begin with one of the other business models with a view to incorporation if and when the business warrants it.
An example of this decision making process concerns the tax considerations of incorporating:
If clients expect losses during the start-up phase, these can be applied against their personal income, giving them a tax benefit. In this case, clients might not wish to incorporate until the business is more profitable. However, when the company’s earnings are more substantial, including after-salary and expense profits, that might be the right time to incorporate in order to gain the advantage of the lower corporate tax rate. When you know the applicable laws and regulations, you then need to strategize so as to use them to your best advantage.
Registering Your Corporation
For clients who choose the corporate business model, Howard Nightingale will provide all services required to successfully incorporate your business and ensure it begins on solid ground, including:
- Incorporating in Ontario, or if needed, incorporate federally and register the business in Ontario
- Select and register a corporate name. This can be the assigned number (i.e. 987654 Ontario Inc.) which is an easy and inexpensive method, or choosing a name that suits your company and that can attract clientele, but which requires more time and effort to register, using the government’s NUAN system to search, validate and finally, to register the name.
Prepare and arrange for the execution and filing of the articles of incorporation. These determine the structure of your business, including:
- The number of directors
- Setting the type and number of shares to be issued
- Restrictions on share transfers
- Prepare share certificates
- Restrictions on the type of business that the corporation can operate
- Complete security registers and registers of officers, directors and shareholders – Prepare all Notices, the minute book and the corporate seal
- Consult with corporate accountant to ensure we use the correct share structure
- During the registration process, ensure that required accounts such as HST, Payroll and WSIB are requested
Provide for an agreement of dissolution. For a discussion of its importance, please review our blog, “The Ying and Yang of Choosing the Right Business Model; Part 3 – Incorporation.”
At all times, Howard Nightingale not only advises and consults, but listens to your concerns and needs because, ultimately, it is your business.