When you’re a small business owner with a couple of years experience under your belt and a healthy cash flow, you might wonder what’s next to keep growing and thriving. Are you 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 follow the steps to complete the process. How simple is that?
Your First Decision: Federal or Provincial Incorporation?
First, it’s a good idea to decide whether to incorporate your small business federally or provincially. The basic difference is one of scope — or where you do business. Does your business need to be able to do business across Canada, or is the majority of your business in one province? The answer to this question helps you make a sound decision.
Federally incorporating your business is more expensive and involves more paperwork – both during the incorporation process and every year afterward. The big advantage is that federal incorporation allows your company to use the same name in every province and territory, even if another company is doing business in a specific province using a similar name. With federal incorporation, you still have to register your corporation in all the provinces and territories in which you do business.
On the other hand, if you incorporate your business provincially, you have the right to use your business name exclusively in the province where you incorporate it, but not elsewhere. So if you incorporate in British Columbia as Mulberry Inc. and then want to do business in Alberta, you may discover that there’s already a Mulberry Inc. there – meaning you can’t use the business name in that province.
You can follow the lead of many sole proprietors who hedge their bets, incorporating provincially when they first incorporate and then incorporating their businesses 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.
It’s a good idea to keep your expectations flexible and choose three or four names you can live with that meet all the requirements.
Consider including these three elements in your corporation’s name:
- A distinctive portion that identifies the particular corporation, such as a unique brand name
- A descriptive portion that identifies the particular activities of the corporation, such as accounting or graphic design
- 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 have your name wish list in hand, you can do a New Upgraded Automated Name Search (NUANS) to see if there are any other identical or similar names 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.
Once you have a successful NUANS result, and the system accepts your proposed name, the system reserves the name for you for a certain number of days (which varies by province). During this time 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, often register as numbered companies. But a string of numbers doesn’t stand out on your storefront, so you may want a more meaningful and attractive name for your new corporation.
Steps to Follow for Incorporation
With 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 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 your company in has the details of how to get and complete these forms.
For federal incorporation, you also need a Notice of Directors in addition to the other documents. Corporations Canada published a detailed Guide to Federal Incorporation that helps guide you through how to incorporate online.
2) File your documents and incorporate.
You can handle filing the documents by incorporating 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. When you’re a small business owner moving up in the world to incorporation, you know how important it is to watch your money. 4.3 million customers use QuickBooks. Join them today to help your business thrive for free.