Incorporation Definition
Incorporation is an kind of business ownership which creates a distinct legal entity that is distinct of its shareholders (shareholders) as opposed to other legal business structures, such as sole proprietorships or partnerships.
When a company is established the corporation’s owner is given shares proportional to the amount of ownership. A company can be either privately or publicly owned. Public companies (such like IBM, General Electric) trade shares on stock exchanges like TSE or the Toronto Stock Exchange (TSE) or the New York Stock Exchange (NYSE).
Incorporation in Canada The Reasons to Incorporate?
The main benefit for incorporation is that it allows legal separation between the individual from their company. Theoretically, only the owners of a corporation is personally liable for any obligations, debts or actions of the business. This protection against liability is one of the major reasons businesses opt for incorporation over other kinds of businesses like sole proprietorships and partnerships. Typically, a shareholder is only responsible for the non-paid portion of the shares that are owned.
There are instances that directors of a company may be personally accountable even though the company is formed:
debts If your business is an new venture and requires financing,it is highly unlikely that a financial institution will be able to provide loans without guarantees from the business’s owners. If your company is insolvent and fails to pay the loan the assets are personal assets that the business owners have put up to serve as collateral may be confiscated from the lender, such as cars, houses or investment accounts.
- Negligence If, you are in the course of conducting business, you engage in an error that results in injuries to another person and you are held personally accountable (for instance, as carpenter you create a deck that is not safe and the customer suffers injuries).
- Fraud Directors of a business could be personally held accountable for fraud-related acts. Directors are bound by a fiduciary obligation to handle the company’s finances with a sense of responsibility and avoid mishandling finances or asset, or inflating the company’s revenues or assets through public reports, as well as falsely declaring costs are instances of fraud that the directors may be accused of being sued.
- Inability in paying taxes to file annual reports, or call directors’ meetings.
Many firms (whether incorporated or not) are covered by the insurance to safeguard against claims for damages resulting from negligent actions, like the insurance against errors and omissions or general liability insurance.
It could also be beneficial to set up your business in a corporate structure in the event that you want to retire. For instance, if you wish to continue your company within the family, and your company is a sole proprietorship, then you won’t be in a position to pass the company on to your children without having to transfer the business’s assets. Additionally, structuring your business as an entity makes it simpler to “divide” the business between your children since you could then give the company with a variety of shares. Check out Family Business Succession Plan for more information.
Find out more about the reasons to include.
Incorporation in Canada How to Incorporate?
Although the process of incorporation will be the same, no the location you choose to incorporate in Canada the incorporation process can be carried out provincially, giving an entity the ability to run its business with its own corporate identity in a specific province. Federal incorporation grants a business the ability to operate with its own corporate identity across Canada. Corporate incorporation within Canada Provincial vs. Federal discusses the drawbacks and benefits of both fundamental kinds of incorporation. As you’ll see that the decision isn’t solely a case of either or If you choose to incorporate federally you’ll need to incorporate provincially too.
Federal Incorporation in Canada
If you opt for federal incorporation, you will need to follow the process of incorporation via Corporations Canada. (Corporations Canada is the governing body for its own CBCA. CBCA ( Canada Business Corporations Act). They have offices located at Vancouver, Ottawa, Montreal as well as Toronto.) It is possible to incorporate your business on the internet, or download the necessary forms to complete in the incorporation process. You can do this via mail, fax Internet or by mail.
To incorporate federally , you need to submit these documents
- Articles of incorporation
- First Registered Office Address, as well as First Board of Directors
- An Nuans Name Search Report applauding your name you’ve chosen for your business (unless it’s a company that is numbered).
Visit this site of Corporations Canada website for a list of the fees that are required for incorporation and annual reports and corporate amendments.
The Provincial Corporation in Canada
If you opt for provincial incorporation it is necessary to speak with the Provincial Registrar in your area. Each of the provinces and territories have websites that offer the option of online incorporation for provinces. There are companies that provide incorporation services both provincial and federal.
Find out more about the incorporation of the Canadian company for example:
How to Set-Up Class Shares for an New Corporation
How Much Does it Cost to incorporate into Canada?
Should You incorporate Your Small Business?
What to Do When You Receive The Certificate Of Incorporation
Example:Tamara found that incorporation in Canada was essential to her companybecause the other businesses she was planning to work for required to have all contractor included.
