Time to Incorporate Your Small Business?

By QuickBooks Canada Team

3 min read

Thinking it’s time to incorporate your business but putting it off because of all the expense and hassle?

Incorporation in Canada isn’t as difficult as you may think. All you have to do is make two decisions and then just follow the steps to complete the process.

Your First Decision: Federal or Provincial Incorporation?
First, you have to decide whether to incorporate federally or provincially. The basic difference is one of scope; does your business need to be able to do business across Canada or is the majority of your business in one province?

Federally incorporating your business is more expensive and involves more paperwork (both during the incorporation process and every year afterwards), but  the big advantage is that federal incorporation allows your company to use the same name in every province and territory, even if some other company is doing business there using a similar name.

You will, however, have to register your corporation in all the provinces and territories that you will be doing business in.

On the other hand, if you incorporate your business provincially, you will have the right to use your business name exclusively in the province where you’ve incorporated but not elsewhere. So if you incorporate in BC as Mulberry Inc. and then want to do business in Alberta, you may discover that there is already a Mulberry Inc. there – meaning you can’t use that business name in that province.

Federal incorporation or provincial?

Many sole proprietors hedge their bets, incorporating provincially when they first incorporate and then incorporating their businesses extra-provincially in other provinces as the need arises.

Your Second Decision: What to Name Your Corporation
If you’re already set on a particular name for your corporation, this is the decision that can cause a lot of hair-pulling; corporate names have specific requirements and because of the ever increasing number of corporations, there’s a really good chance the name you want is already taken.

The best thing to do is to be flexible and pick three or four names you can live with that meet all the requirements.

Corporate names must contain three elements:

  • a distinctive portion that identifies the particular corporation;
  • a descriptive portion that identifies the particular activities of the corporation;
  • and a legal element, identifying the company as a corporation, such as Limited, Incorporated, or Corporation.

For instance, Mulberry Graphic Design Inc. Or McKenzie Lumber Limited.

Once you’ve got your name wish list in hand, you’ll need to get a NUANS (New Upgraded Automated Name Search) done to see if there are any other identical or similar names to your chosen name in the jurisdiction where you want to incorporate your business.

You may have to do more than one name search before you hit on a name that the system accepts.

But once you have a successful NUANS result and your proposed name is accepted, it will be reserved for you for a certain number of days (which varies by province) – during which you need to complete the incorporation process so you don’t lose your name reservation and have to start the process all over again.

Or…

You could avoid all of this by using an assigned number as a company name. Construction and/or development companies, for instance, are often set up as numbered companies. However, a string of numbers doesn’t look very good on a storefront so you may well want a more meaningful and attractive name for your new corporation.

Then Follow the Steps
Your NUANS report in hand, you’re ready to close the deal and incorporate. You have only two steps to go:

1) Prepare your documents.
You will need The Memorandum, The Articles of Incorporation and The Notice of Offices for provincial incorporation, and the provincial registry of the province you want to incorporate in will have the details of how to get and complete these forms.

For federal incorporation, you will also need a Notice of Directors. Corporations Canada has published a detailed Guide to Federal Incorporation that will lead you through the process.

2) File your documents and incorporate.
You can do this online through the website of the appropriate provincial corporate registry – or the old-fashioned paper filing way if you prefer.

Congratulations on your new corporation!  Your new Inc. is ready for business.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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