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Ontario|Business LawCorporations 219 How to incorporate a business The legal form of business you choose has an important affect on the entire nature and structure of your business. A lawyer can help you decide if you should incorporate and what corporate structure is best for you. Before you register your corporation, you must choose a corporate name, draft your Articles of Incorporation, and submit a processing fee. The following is a brief overview of the process.
- Corporate name
First, you must choose a corporate name. If you do not want to choose a name, you can simply use the corporate number assigned by the Ministry of Consumer & Business Services. If you do decide to use a corporation name, you must make sure it is not being used by another company. To do this, you will need to conduct a NUANS name search. NUANS stands for New Upgraded Automated Name Search. There is a small fee and you will receive a report containing all of the businesses and trademarks with names similar to the one you propose to use. The NUANS report must be submitted to the Ministry along with the rest of the application requirements.
- Articles of Incorporation
Second, the Articles of Incorporation must be drafted. The Articles of Incorporation is a document that sets out important information about the structure of your corporation, such as the minimum and maximum number of directors your corporation is allowed to have, the different classes of shares, and the names of the incorporating directors.
Two original sets of the Articles of Incorporation are to be submitted to the Ministry of Consumer & Business Services, along with the incorporation fee of $360.
- Should the business be incorporated federally or provincially?
If your business will be located or operate regularly in more than one province or in foreign countries, it may be best to incorporate under federal law. This allows you to carry on business in all Canadian provinces without a special license, although a simple registration may still be required in some provinces.
If you plan to operate mostly within one province, a provincial incorporation will likely suit you. If you do business in another province, however, you may have to register it there and may be required to obtain an extra-provincial licence.
You will likely need a lawyer to register in a province outside of where you live. Also, some jurisdictions have residency requirements. Most Canadian laws require that a majority of the directors of a corporation be Canadian residents. The federal law has been amended recently to reduce the Canadian residency requirement for corporations in most industry sectors to 25%, except where there are fewer than 4 directors, in which case at least one must be a resident Canadian.
In Ontario, a majority of the directors must be resident Canadians, but if the corporation has only one director, that person must be a Canadian resident. If there are two directors, one must be Canadian.
Permanent residents of Canada who are not yet citizens may qualify as "resident Canadians."
Foreign investors can deal with the residence requirement for directors by finding Canadians to represent them on the board of a subsidiary. Ontario also allows "unanimous shareholder agreements" to be created, which give the power of the directors to manage the business in whole or in part to the shareholders.
Also, some U.S. investors can easily incorporate in Nova Scotia where a unique "unlimited liability company" form of business exists that offers certain U.S. tax advantages and different residency requirements. A lawyer can explain whether this form of business is right for you.
For more information about corporations, refer to other sections of Legal Line . For assistance with the incorporation process, you should contact a lawyer.
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