Incorporating creates a legal entity separate from its shareholders or its members, shielding personal assets from creditors or legal actions against the business.
Why incorporate in Canada
If you are considering starting a new business in Canada or already an owner of an established business, there are important advantages to be gained from incorporation. Incorporating creates a new and separate legal entity for the business, shielding personal assets and providing a more formal business structure. The new corporation will have the same rights and obligations under Canadian law, and will be seen as a separate, legal entity. This means the entity can acquire assets, obtain loans, enter into contracts, sue or be sued, and even be found guilty of committing a crime. The corporation’s money and other assets belong to the corporation, separated from the shareholders and/or owners of the business.
How are Canadian corporations regulated?
Canadian corporations adhere to a ‘comply-or-explain’ system where they explain their reasons for non-compliance with company laws in their annual report. This allows many Canadian corporations the ability to define their own growth and development strategies, so long as they are explained to shareholders first.
Key Benefits of the Service
We take the guesswork out of forming a corporation by quickly and accurately completing all the required paperwork on your client’s behalf, saving time and money.
- Personal Asset Protection
- Enjoy Potential Tax Benefits
- Gain Credibility
- Open a Canadian Business Bank Account
Incorporation limits the liability of the corporation’s shareholders to the amount of their investment. If under unfortunate circumstances the business should declare bankruptcy, the shareholders of the business don’t lose any more than their investment. The shareholders cannot be sued by creditors for repayment of the business’ debts.
One of the first decisions your client will need to make when incorporating their business is deciding between a provincial or federal corporation. For provincial corporations, the corporation formed in a specific province must only do business there. Forming a corporation at a federal level means they can do business in any province. It also affords the business protection from having the company name used by another corporation in a different province, although we do recommend filing a trademark with CIPO ( Canadian Intellectual Property Office) to retain the full rights to the mark.
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There are a few considerations to keep in mind when choosing whether to incorporate in a federal or provincial jurisdiction. First will be the level of protection for the corporate name, another consideration to make is the cost of incorporating the business and the last consideration to make is where you want to register the business.