5 Steps to Setting Up a Corporation in Canada

You have plenty of ideas in your head for businesses you’d like to start, however turning those ideas into a real company begins with understanding how to set up a corporation in Canada. Along with the benefit of having your business idea finally come into fruition, there are also many benefits to incorporating a business, some of which include protecting your personal assets, improving credibility and accessing potential tax advantages.

However, before you turn an idea into a credible business, it’s important to lay out the groundwork and build a foundation of knowledge. In this blog, we will show you the steps you need to take to set up a corporation in Canada. Having read this blog, you’ll come away with an understanding of what you are about to embark on to better prepare yourself.

1) Federal or Provincial?

You need to decide whether you’d like a federal or provincial corporation. Federal pertaining to all of Canada and provincial pertaining to the province you’re based in. Within the federal incorporation process, you’d acquire other registrations at the same time including articles of incorporation, a federal business number, a federal corporation income tax program account and more. If you decide to head the provincial route, you’d need to abide by the provincial rules and policies. If you’re planning on expanding to other provinces and territories, you’d register as an extra-provincial or extra-territorial corporation.

2) Choose a Name

This seems like an obvious step but is often overlooked. Choosing a name for your corporation is important and needs to be done correctly as this will be the name to legally define your corporation. When choosing a name for the corporation, you have two options: a numbered company or a custom name. A numbered company is usually the fastest option and there is no name approval required, whereas a custom name is a lengthier process. Additionally, you’d have to ensure it’s a unique name, doesn’t conflict with existing trademarks or businesses and includes a legal ending such as Inc., Corp., etc. If opting for the custom name, it’s best practice to conduct a NUANS name search which will help you see if there are any existing corporate names, business names and trademarks that conflict with the name you’re proposing.

3) File Articles of Incorporation

Filing articles of incorporation is noted as an official registration step. This is where you establish the structure of your corporation through submitting the appropriate legal documents filed with either federal, provincial or territorial governments to establish a new corporation. You will be required to submit your business name, how your company is organized (share structure), the corporation’s number of directors, any restrictions you would need to set for your business and the registered business address. If you’re incorporating a small business, it’s best to consider choosing a basic incorporation as it is less of hassle and everything is “pre-packaged” for you. Within the basic incorporation, you’d be assigned a maximum of ten directors, one or two classes of shares and an assigned, numbered corporate name. This step is essential as this establishes the framework for your corporation.

4) Register Your New Corporation with the CRA & Register CRA Program Accounts

In this step, you’re telling Canada Revenue Agency (CRA) that your corporation exists and setting up the appropriate tax accounts your business needs. Once your business is incorporated, you’ll receive a Business Number (BN) which alludes to your corporation’s tax identification number. Under the business number, you’d need to register for one or more CRA program accounts. These CRA accounts include: the corporation tax account, created automatically when the corporation is incorporated, a GST/HST account for businesses earning more than $30,000 in annual revenue, a payroll account and an import/export account only needed for corporations doing business internationally.

5) Submit Documents and Pay the Fee

Once you’ve completed the appropriate documents and set up your accounts, you’ll need to pay the fee to incorporate. All these steps may be done through Canada Revenue Agency’s Online Filing Centre.

Once you register and submit payment, the work doesn’t end there. You will still need to set up your corporate bank account, plan your business expenses and determine whether you’ll be paying yourself a salary, dividends or split income with family members.

Setting up a corporation can be tricky, overwhelming and may require a lot more planning than you think, but one thing is for sure. It’s imperative you speak to a legal professional who specializes in corporate law. This step will take a lot of the weight off your shoulders and ensure you’re entering this new stage of life knowing you have the support you need to succeed. Book your consultation and speak to one of our team members today.