Introduction

Incorporating a business in Ontario offers numerous benefits, such as limited liability, tax advantages, and increased credibility. However, the process of corporate incorporation involves several important steps and legal considerations. Whether you are starting a new business or converting an existing business structure, understanding how to incorporate in Ontario is critical. In this article, we’ll walk you through the steps of incorporating a business in Ontario and discuss the key factors to consider.

What is Corporate Incorporation?

Corporate incorporation is the legal process of forming a corporation, a separate legal entity that is distinct from its owners (shareholders). This means that the corporation itself can own property, enter into contracts, sue and be sued, and assume liability for its actions. Incorporating a business provides the owners with limited liability protection, meaning their personal assets are generally not at risk in case of business debts or legal claims unless a personal guarantee is given.

Steps to Incorporate a Business in Ontario

1. Choose a Business Name: The first step in incorporating is choosing a unique name for your business. The name must comply with Ontario’s corporate naming regulations, which require the name to be distinguishable from other businesses already registered in the province.
2. Conduct a Name Search: It’s essential to conduct a name search to ensure that your chosen business name is available and does not conflict with existing registered names. You can perform a name search using the Ontario Business Registry or by obtaining a NUANS (Newly Upgraded Automated Name Search) report.
3. Prepare Articles of Incorporation: The Articles of Incorporation outline key details about your business, including its name, registered office address, share structure, and the number of directors. These documents must be filed with the Ontario Ministry of Government and Consumer Services.
4. Appoint Directors: As part of the incorporation process, you must appoint at least one director who will oversee the business’s operations. Directors are responsible for managing the corporation’s affairs and ensuring compliance with relevant laws.
5. File with the Ontario Ministry: After completing the necessary paperwork, you will need to submit your Articles of Incorporation and other required documents to the Ontario Ministry of Government and Consumer Services.
6. Obtain an Ontario Business Number (BN): Once incorporated, you will need to obtain an Ontario Business Number (BN) from the Canada Revenue Agency (CRA). This number is used for tax purposes and is required for various business-related transactions.
7. Register for Applicable Taxes: Depending on the nature of your business, you may need to register for the Goods and Services Tax (GST) / Harmonized Sales Tax (HST) or other provincial taxes. You can register for these taxes through the CRA.

Benefits of Corporate Incorporation in Ontario

1. Limited Liability: Incorporation protects the personal assets of shareholders from business liabilities. This means that if the business incurs debt or is involved in legal action, shareholders’ personal finances are generally safe. This principle is called the corporate veil, there are few situations in which the corporate veil can be lifted by the court and shareholders as well as the director(s) can be held personally liable for their actions.
2. Tax Advantages: Corporations in Ontario may benefit from lower corporate tax rates compared to personal income tax rates. Additionally, corporations can deduct certain expenses that may not be available to sole proprietors or partnerships.
3. Access to Funding: Incorporated businesses often have an easier time accessing funding from investors or financial institutions. Investors are more likely to invest in a corporation, as they can purchase shares in the company.
4. Credibility: Operating as an incorporated entity enhances your business’s credibility with clients, customers, and suppliers. Many businesses prefer to deal with incorporated companies, as it provides a sense of stability and professionalism.
5. Perpetual Existence: Unlike a sole proprietorship or partnership, a corporation continues to exist even if the owners change or pass away. This ensures continuity in business operations.

Ongoing Corporate Compliance in Ontario

After incorporating, businesses must comply with various ongoing corporate requirements, including holding annual meetings, filing corporate tax returns, and maintaining corporate records. It’s also important to keep your Articles of Incorporation and other corporate documents up to date.

Starting a business in Ontario? If you need guidance on corporate incorporation, structuring your business, or understanding your legal obligations, contact LexCounsel. Our team is here to help you navigate the process and set your business up for success.