Business Incorporation Lawyers

What is incorporation?

By incorporating your business, you are setting it up as a legal entity that is separate from its investors, owners, shareholders, and employees. This means that, for all legal purposes, the law will treat the firm as a person with ownership rights, responsibilities, and legal obligations. The main benefits of incorporation are limited liability, perpetual existence, and legal status as a separate entity.

What are the main advantages of incorporating your business?

Limited liability

Upon incorporation, as a legal entity, your firm is solely responsible for the liabilities, debts, and other claims as part of its business operations. The liabilities are limited to the firm’s assets alone and do not extend to the personal assets of the shareholders and owners. For example, when the company faces insolvency, the creditors may request the court to authorize the liquidation of the company’s assets to repay the loans, but the owners are not personally liable for these debts.

Perpetual existence

A corporation can legally continue its existence beyond the lifespan of its owners. Unless the business is wound up through a legal process, such as liquidation or dissolution, or acquired by another firm through amalgamation, it continues its existence as far as the law is concerned. The reins of the business can be handed over to new owners and employees, and the operations can continue as before.

Separate legal entity

By incorporating your business, you are registering it as a separate entity under the law. This means that for all legal purposes, the company will be treated like an individual. It is allowed to own property and can be sued or convicted for a criminal offence, enter into a business agreement or contract, and has the right to sue others for damages. This legal status is separate from the owners and shareholders and continues regardless of any change in ownership or transfer of shares.

Tax benefits

Unlike a sole proprietorship, where you pay personal income tax, an incorporated business will be subject to the corporate tax rate, which is generally lower than the personal income tax rate.

Easier to raise capital or acquire loans

It will be easier to raise capital or to acquire loans in the case of a professionally incorporated business. Capital can be easily raised by selling shares or bonds. A corporation, coming under more regulation and compliance requirements, will have better credibility than a sole proprietorship, thus making it easier to get a loan approved.

What are the steps involved in the incorporation process?

Choose between setting up a federal or provincial corporation

This will depend entirely on the nature and scale of your business. If your business only serves the local market requirements of your province without any plans for expansion, then incorporating at the provincial level will be enough. It goes without saying that incorporating your business at the federal level is required for operating nationally or if you have plans to expand nationally soon. Also, the compliance burden on your business will be greater at the federal level than at the provincial level.

Decide on the legal name for your business

You need to decide on a unique name for your corporation that is not being used by any other businesses out there. If not, you will be inviting a trademark lawsuit from the other firm. Decide on a name that reflects your company’s goals and long-term vision.

Articles of incorporation

The articles of incorporation must contain details, such as the name of the corporation, registered office address, distribution of shares and the details of the directors. Submit the articles of incorporation and complete the formalities, including the payment of fees.

Corporate bylaws and issuance of share certificates

The board of directors will have to prepare the corporate bylaws, which have to be approved by the shareholders. Bylaws are the rules governing the procedures and the business affairs of the corporation. You also need to issue official share certificates to all the shareholders. Executing a shareholder agreement is highly advisable, although not mandatory. This agreement will define the relationship between the shareholders and the corporation.

Apply for necessary permits and licences to start operations

Once the formalities are completed, you need to apply for permits, licences, tax and bank accounts to start your business operations.

How can our business lawyer help you?

Legal advice and guidance

There are many factors to consider when incorporating your business, such as the corporate structure of your business, whether to incorporate your business at the federal or provincial level, and the compliance requirements. An experienced business lawyer will advise you based on the particular requirements and goals of your firm.

Help with the legal documentation and filing it with the appropriate authorities

Your lawyer will help you with the drafting of the articles of incorporation, corporate bylaws and any other documents required for the process of incorporation.

Tax, financial, and regulatory compliance

As already mentioned, a corporation is subject to more regulatory requirements than a sole proprietorship. Your lawyer will guide you through such rules and regulations regarding tax, financial, and regulatory matters, both at the federal and provincial levels, as they apply to your organization.