This is meant to be a practical guide providing you a short, succinct summary of the steps required to incorporate a business under Ontario law or the federal law of Canada.
1) Choosing a Business Name
Choosing a name for your business can be a little stressful, but ultimately, it’s a fun exercise.
There are five typical steps to confirming a name is available. They don’t necessarily have to be completed in the order outlined below, but it is a good idea to go through each step before deciding to incorporate.
Step One: Google. A good first step is to simply Google your chosen name to see if anyone is already using it.
Step Two: Domain Name search. Next, you’ll want to check if a suitable domain is available. You can use a domain name registrar like Hover to search and see what's available. Although most .com's are taken, there are still plenty of .ca’s, .io's, .co's and other TLDs available. Another option many new businesses and startups choose is to add “get” “go” or “my” at the front of their business name to get an available domain name (i.e. www.getrhinoicecream.com).
Step Three: Legal Requirements. In terms of the legal requirements for your business name, you’re supposed to have three parts:
[Distinctive] + [Descriptive] + [Legal Ending]
For example: Rhino Ice Cream Inc.
That being said, there are many companies that simply have a distinctive element (i.e. Apple Inc.). The difficulty with simply a distinctive element is it can be rejected by the government authority, meaning that additional costs would need to be incurred to choose a different name with a descriptive element.
Step Four: Trademark Search. You should check if anyone has already registered a Trademark for your desired name. The Canadian Intellectual Property Office (CIPO) makes it easy using their online search.
When conducting a search, you will want to consider alternate spellings. If your name is similar to one that is already registered, you may not be able to use it if it is likely to cause confusion to consumers.
One final note about Trademarks: they are tied to specific goods or services. This means that you may still be able to use a desired name if your intended use is in a different industry. A trademark lawyer can help you navigate the ins and outs of any issues relating to trademarks.
Step Five: NUANS Search. Finally, you’ll need to get a NUANS search done. We’ve already written at length about NUANS searches. Note, however, that it is common when you incorporate to obtain the NUANS search and the incorporation all at the same time.
Final words of advice, if you’re stuck and having trouble finding a name that works, these business name generators can be useful and fun:
2. Benefits of Incorporation
The two main benefits of incorporation are limited liability and tax advantages.
Limited Liability. By incorporating, you will separate your personal and business obligations. Therefore, if your company goes south, your personal assets will remain protected and untouched. It is important to remember that directors of corporations may remain on the hook for unpaid employees’ wages in specific instances. This is different than if you remained a sole proprietor or a general partner in a partnership, as you would remain personally responsible for the debts of the business.
Tax advantages. Corporations are taxed differently than individuals. Generally, tax rates for corporations are lower than tax rates for individuals. Also, corporations are subject to flat rates of tax, where individuals are taxed on a progressive basis.
Additional benefits include:
Raising Money. It is easier to raise money from investors as incorporated businesses can sell shares.
Transferable. Incorporated companies can be transferred amongst individuals by simply selling shares and succession planning is considerably easier.
Continuous lifespan. Corporations are not limited to the lifespan of the owners. They can exist indefinitely.
3. Drawbacks of Incorporation
The primary drawback from incorporation is the added expense. There will be the initial cost to incorporate your company as well as ongoing accounting and annual filing costs. Also, a corporation requires additional ongoing paperwork and record keeping. Thankfully, we've automated all ongoing corporate maintenance through Founded.
4. Where to Incorporate: Federal v. Provincial
In Canada, you have the option of incorporating provincially or federally. If you choose Federal, you’ll need to register the company in the province where it is located.
The differences between incorporating provincially or federally are often exaggerated. Both allow the company to operate in all provinces and service clients from anywhere in the world. There are a few key differences, which we’ve highlighted below:
- Incorporated pursuant to the Canada Business Corporations Act
- Historically, more ongoing paperwork for federally incorporated companies, however, we've automated all paperwork with Founded
- Corporate name is registered throughout Canada
- $20.00 online charge for filing Annual Returns online ($40.00 if done offline)
- Incorporated pursuant to the Ontario Business Corporations Act
- Historically, less ongoing paperwork
- More expensive to initially incorporate ($175-$225 more in filing fees)
- Corporate name is only registered in Ontario
- No charge for filing Annual Returns
It is important to note that registration of a corporate name is not the same as a trademark and you won’t have exclusive rights to your corporate name until you register a trademark.
5. How to Incorporate Your Company
Now we get to the most important part: how to incorporate your company. In very general terms, there are three different ways to incorporate in Ontario.
Do It Yourself (DIY)
First, you can incorporate yourself. Not surprisingly, we don’t recommend this approach. But it’s important for us to explain why.
Ontario Incorporation: Cost for named incorporation including disbursements are approximately $450.00 — $500.00.
Federal Incorporation: Cost for named incorporation including disbursements (NUANS search): $225.00.
The obvious advantage of doing it yourself is the cost. That being said, there are significant downsides:
No Company Formation Documents. The biggest issue is that by doing it yourself, you only obtain half of what is required when incorporating. It won’t provide you with the following necessary corporate organizational documents: Shareholder Resolutions, Director Resolutions, Shareholder, Director and Officer Ledgers, Share Certificates and Bylaws. These are significant, legally required items that simply aren’t provided when doing it yourself.
One-size-fits-all approach. This means that you won’t be able to set up various share classes and you’ll be stuck with their defaults. Alternate share classes can be extremely useful (as we explain here) for adding non-voting shareholders or investors who will likely want preferred shares. There are also reasons why you may want multiple voting share classes if there are more than one shareholder.
Traditional Method: Law Firms
The traditional method that many small businesses use to incorporate is to contact a local law firm. All of the concerns with the DIY approach are removed: you’ll get customized advice from your lawyer that fits your company’s future goals as well as all the necessary corporate organizational documents.
The downside with the traditional method: the cost is higher and the process is entirely offline. Incorporating through a traditional law firm can range in price from $1,000 — $1,800. Also, you’ll need to call the law firm, set up an appointment, and either drive to the lawyer’s office to pick up the documents or have them couriered to you.
Incorporating through Founded
At Founded, and we've made incorporating easy and affordable. Here’s what makes Founded different:
One Affordable Price. With Founded, you can incorporate your company through our intuitive platform for $647. We explain everything in plain language, so you can feel confident navigating this process. Processes that typically take weeks, involve stacks of paper, and cost thousands of dollars, have been transformed into quick, paperless, and affordable tasks that require no legal expertise and can be completed in minutes.
To start incorporating your company on Founded, simply click here. It's free to create an account and we have a name search tool that does an instant preliminary check on your desired business name for free!
Company Formation Documents. Company Bylaws, shareholder and director resolutions, share issuances, and more are all automated through Founded. This means that you'll get all the documents that you would normally get if you went to a law firm, tailored to your business, and you'll save time and money in the process.
Automatic Company Updates. Anytime your company details change (like when you want to add a new director or change your address), Founded automatically takes care of the paperwork: automatically filing forms with the government, preparing the required corporate resolutions, gathering eSignatures, and securely storing all documents back into your account.
Secure & Organized Online Storage. Once you've incorporated, all your company's legal documents are organized and securely stored in your Founded account.
The Bottom Line
Deciding to incorporate is one of the first big steps to take as a small business owner. If you have questions along the way, we’d love to help out. Feel free to email us at email@example.com and we’ll be sure to respond as soon as we can. Or, simply create a free account here.
We’ve helped all sorts of businesses (startups, consulting companies, bakeries, marketing and PR agencies, co-working spaces and many more) with an affordable and effortless incorporation. We’d love to help your business next.