Starting a business can be an exciting venture, but it’s essential to ensure you’re taking the necessary legal steps to protect your company and yourself as an entrepreneur. Incorporating your business is one of the most crucial steps in the process, and it comes with several legal requirements that you should be aware of. In this post, we’ll explore the legal requirements of incorporating your business in Canada, with a focus on Toronto and Ontario.
What is Incorporation?
Incorporation is the process of forming a legal entity, also known as a corporation. This process involves creating a separate legal entity that is distinct from its owners or shareholders. Once you incorporate your business, it becomes a separate legal entity with its own legal rights and obligations.
Legal Requirements of Incorporating Your Business
- Choosing a Business Name
The first legal requirement for incorporating your business is choosing a name that is unique and not already registered. In Ontario, you can search for available business names using the NUANS (Newly Upgraded Automated Name Search) system. This system helps to prevent businesses from registering the same name as another company.
- Articles of Incorporation
The next step in incorporating your business is to file Articles of Incorporation with the Ontario government. This document contains essential information about your business, such as the name and address of the corporation, the number of shares authorized, and the rights and restrictions attached to each share.
- Shareholders Agreement
A shareholder’s agreement is a legal document that outlines the relationship between the corporation and its shareholders. It outlines the rights and responsibilities of each shareholder, including how the company will be managed and the distribution of profits and losses.
- Business Permits and Licenses
Depending on the nature of your business, you may need to obtain permits or licenses before you can operate legally. For example, if you plan to operate a restaurant, you will need to obtain a food service permit from the local health department.
- Taxation
Incorporating your business also comes with tax implications that you should be aware of. As a corporation, you will be subject to corporate income tax, which is different from personal income tax. You may also need to register for the Goods and Services Tax (GST) or the Harmonized Sales Tax (HST) if your business meets certain revenue thresholds.
Conclusion
Incorporating your business is an essential step in protecting your company and yourself as an entrepreneur. By following the legal requirements outlined above, you can ensure that your business is operating legally and is protected in case of any legal issues. If you’re unsure about the legal requirements for incorporating your business, it’s always best to consult with a legal professional who can provide you with expert advice tailored to your specific situation.