Are you currently running or thinking about starting a new business? This document sets out some important considerations for new or existing business owners who are considering whether to incorporate.
What is a Company?
In British Columbia, the Business Corporations Act governs the creation of companies. Once incorporated, a company can act and contract in its own name. This distinguishes a company from a sole proprietorship which is essentially an individual who decides to carry on a business under their personal name and perhaps with a registered trade name.
What is the Process?
Incorporating a new company is not an overly complicated process but it is important that it be completed correctly. Below is a list of the steps required to incorporate:
– Determine whether you want to operate as a numbered company (i.e. 123456 B.C. Ltd.) or as a named company (i.e. Smith’s Consulting Ltd.).
– If a numbered company, you will not get to select the number but you will simply be assigned the next number in the corporate registry at the time you incorporate.
– If you wish to use a named company, a request for approval of the corporate name must be submitted to the Corporate Registry.
– The request can include up to three name choices which must include a distinctive element (i.e. name, region, etc.), descriptive element (i.e. descriptive of the type of business) and a corporate designation (i.e. Inc., Incorporated, Ltd., Limited, Corporation, Corp.).
– Once submitted, the name will be reviewed by the Corporate Registry to determine whether it is acceptable in that it is not confusing with another existing name and does not include prohibited wording. It is also recommended to do some initial searching to determine whether an existing company may be using the same or a similar name as it would potentially impact your ability to trademark your name if you wished to do so down the road.
– Once approved, the corporate documents would be prepared to create the company.
– The share structure needs to be considered – i.e. what classes of shares should be created and with what specific rights and restrictions.
– Who will act as directors and/or officers for the company?
– Who will the shareholders be?
– Are there any specific items to be included in the articles such as restrictions on transfers of shares?
– Once all necessary documents are done and signed, the incorporation application is filed with the Corporate Registry to create the company.
– The company will then receive a business number and can be registered for GST, PST, WorkSafe, and any other necessary registrations.
What are the Benefits?
An incorporated company can provide several benefits to a business owner including some liability protection (there are limited areas where a director would take on liability for the acts of a company) as well as income splitting potential if the business owner has a spouse or family members with limited income.
What are the Disadvantages?
A company is more costly to set up and maintain than a sole proprietorship and is not as simple. It would require the filing of an additional tax return for the company each year as it is a separate entity from the individual business owner.
What to Consider?
It is strongly recommended that you speak with a lawyer and an accountant with respect to your particular circumstances to determine what works best for you. There are other business structures available that may make more sense for your business
This information is general in nature only. You should consult a lawyer before acting on any of this information. This information should not be considered as legal advice. To learn more about your legal needs, please contact our office at (250)448-2637
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