A 10-Step Checklist for Incorporating Your Small Business in Canada

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Legal help to incorporate your small business

Incorporating your small business in Canada is an exciting milestone, offering benefits like liability protection, tax advantages, and enhanced credibility. While you don’t legally need a lawyer to incorporate, having one can make the process smoother and help you avoid costly mistakes.

While anyone can handle the paperwork themselves, getting legal advice can save you time, money, and potential headaches later on. Let’s break down the steps involved in incorporating a small business and how a lawyer can be one of the best investments you make in the process.

1. Choose and Reserve Your Business Name

Choosing the right name for your business is an exciting yet important step. Whether you have one perfect name in mind or a shortlist of possibilities, the decision requires careful consideration. Your business name should be unique, distinct, and original, avoiding similarities to existing businesses and steering clear of offensive or prohibited terms. It’s also essential to include a legal ending, such as “Ltd.,” “Corporation,” or “Inc.” If you’re not feeling particularly creative, don’t worry—you can always choose a numbered company, like “1234567 Ontario Inc.” Before moving forward, you’ll need to conduct a NUANS name search to confirm your chosen name is available. This step is required and is a smart precaution in all cases to ensure your name is truly yours.

2. Deciding on the Right Corporation Structure

There are different ways to structure when incorporating your business, including sole proprietorships, partnerships, and corporations. Each option has its own advantages and legal implications:

  • A sole proprietorship means you are the sole owner and fully responsible for the business;
  • A partnership involves two or more people sharing ownership and responsibilities;
  • A corporation is a separate legal entity owned by shareholders or one owner who owns all the shares, offering liability protection and other benefits.

A lawyer can help you determine the best structure to suit your business goals while ensuring your corporation is set up properly from the start.

3. Decide on Your Corporation Type

  • Provincial Corporation: Operates within a specific province.
  • Federal Corporation: Offers the ability to operate across Canada with greater name protection.
  • Consult with a lawyer to determine the best option for your business goals.

4. Define Your Share Structure

  • Decide on the types and classes of shares your corporation will issue, such as:
    • Common Shares: Voting rights and profit-sharing.
    • Preferred Shares: Priority in dividends but no voting rights.
    • Non-Voting Shares: For employees or investors without decision-making power.
  • Include the share structure in your Articles of Incorporation.
  • Consult a lawyer to ensure your share structure aligns with your goals and complies with legal requirements.

Understanding Share Classes

Ontario corporations can issue different classes of shares, each with its own rights and restrictions. Some key share types include:

  • Common Shares – Typically held by business owners and founders, these shares often come with voting rights and entitle shareholders to a portion of the company’s profits.
  • Preferred Shares – These may have priority over common shares when it comes to dividends and liquidation but may not carry voting rights.
  • Non-Voting Shares – Designed for investors or employees who hold equity in the company but do not participate in decision-making.
  • Special or Custom Shares – These can be tailored for specific needs, such as shares that convert to voting shares under certain conditions.

Legal Considerations and Expert Guidance

In Ontario, your share structure is defined in your corporation’s Articles of Incorporation and can be amended if your business needs change. However, structuring shares incorrectly at the outset can lead to tax complications, loss of control, or legal disputes. Working with a business lawyer ensures that your share classes align with your business goals, protect your interests, and comply with Ontario’s Business Corporations Act (OBCA). 

5. File Articles of Incorporation

The Articles of Incorporation are legal documents that formally establish your corporation. They serve as a blueprint for your business, outlining key details such as:

  • Business Name and Address: Official identification of your corporation.
  • Names and Addresses of Directors: Individuals responsible for overseeing the corporation.
  • Share Structure: Information on the types, classes, and number of shares the corporation can issue.
  • Corporate Purpose: A statement of the intended activities of the business (if required in your jurisdiction).

These articles are critical to defining your corporation’s identity, governance, and operational framework and you must file your articles online or through mail, depending on your jurisdiction.

6. Register for a Business Number (BN)

  • Obtain a 9-digit BN from the Canada Revenue Agency (CRA) to manage:
    • GST/HST registration.
    • Payroll deductions.
    • Corporate income taxes.

7. Update Contracts and Agreements

  • If transitioning from a sole proprietorship, update all business contracts to reflect the new corporate entity. This includes:
    • Employment contracts.
    • Supplier agreements.
    • Leases and service contracts.
  • Add “Inc.” or “Ltd.” to all business materials, such as invoices and marketing materials.
  • Seek legal advice to ensure proper updates and protections.

8. Establish Corporate Records

  • Maintain a Minute Book with important documents, including:
    • Certificate of Incorporation.
    • Articles of Incorporation.
    • Shareholder and director agreements.
    • Meeting minutes and resolutions.
  • Ensure ongoing compliance with the Business Corporations Act by keeping records up-to-date.

9. Open a Corporate Bank Account

  • Use your incorporation documents to set up a separate business account. This helps:
    • Keep personal and business finances separate.
    • Build credibility with suppliers and clients.

10. Obtain Necessary Licenses and Permits

  • Depending on your industry, you may need:
    • Provincial or municipal permits.
    • GST/HST registration (required if your revenue exceeds $30,000 annually).
    • Industry-specific licenses (e.g., food handling, construction permits).

Consulting a Lawyer is a Smart Move When You Incorporate Your Small Business

Incorporating is an exciting step, but it’s also a complex legal process so it’s important to make sure that you set it up properly. A lawyer ensures that everything is done correctly, giving you peace of mind and allowing you to focus on growing your corporation. More importantly, having legal support at the beginning can prevent costly mistakes and provide valuable guidance as your business evolves.

While it’s possible to incorporate on your own, speaking with a lawyer who is experienced in business law is one of the best investments you can make. At Hukam Law, our lawyers are well-versed in helping corporations get started. Contact us at 705-915-0884 or send an email to info@hukamlaw.ca to start incorporating your small business today..

***The information provided in this blog is for general informational purposes only and should not be construed as legal advice. If you have legal questions, we strongly advise you to contact us.