• by admin
• January 27, 2025

Do you know your corporation has the same right as you as a person? Incorporation gives a name that nobody else can have in the province you are incorporated or in Canada if you are incorporated federally. Other major benefits of incorporation include such as limited liability protection, the lower income tax rate for a CCPC, and ease of raising capital. There are procedural differences when you incorporate provincially or federally; however, in this article, we are focusing only on the process of incorporating your business federally.

 

How to incorporate your business federally?

You need to know the following steps and follow their requirements.

 

Step 1 Name of your corporation

You can choose the desired name of your corporation if it is available. You can also incorporate with a numbered name like 1234 Canada Inc. Numbered name is generally preferred when you are not using your business name for marketing or brand building. For example, a rental building can incorporate with a numbered name as they are marketing the location and the address of the property. Similarly, a holding company is used only to control the ownerships of your other corporation. You may not even want this name to be known in public; in this case, you would like to incorporate it with a numbered name.

If you are looking for a custom name of your corporation, you need to first do a search if that name is available. You may not be granted a name if that name is already in use or close to that name which is already in use. The idea here is that your selected name should not be confusing to the public.

RKB Accounting tips: Before incorporating with a custom name, make sure that you have the domain name available for that name. This is important as you want to launch your business website in the future.

 

Step 2 Prepare and file your articles of incorporation

Articles of incorporation is a legal document that establishes the existence of a legal entity and explain the purpose for which they exist. Without preparing and filing a articles of incorporation, you can not incorporate.

Let’s look into some minimum information that you need to include in the articles of incorporation.

 

Share capital: The capital of a corporation is indicated in terms of shares. There are different types of shares that a corporation can have. For example, a corporation can have common shares, preferred shares, share with special rights, etc. Usually, the holder of common shares is considered the owner of the corporation. A corporation must have at least one class of shares which is common shares.

RKB Accounting tips: You should have at two classes of shares that the corporation can issue. One with voting rights and another non-voting rights.

 

Restriction on share transfer – You need to define the process by which a share of the corporation can be issued and transferred. This is very important as it relates to the ownership of the corporation and when it relates to the shares with voting rights. You can include different requirements for transferring the different types of shares.

Maximum number of Directors: By default, it is ten. However, you can increase or decrease the number of directors that you may want today or in the future appointed for your corporation.

Restriction on business: If you wish to put any restriction on your business or for your business activities, you need to include it now.

Other provisions: If you want to include some other provisions, you may include them here.

RKB Accounting tips: Depending on the size of your business and the composition of the board of directors, you may want to include the rights of a director or board of directors, the procedure for issuing debt security, or transfer of debt security, directors rights to borrow, etc.

 

Step 3: Initial registered office address and the first board of directors

Every federal corporation in Canada must have a registered office as a physical address and at least one director.

 

Registered office address: You need to provide the address of the corporation where the records of the corporation will be kept. This address is also supposed to be the mailing address of the corporation.

The First Board of Directors: The followings are the requirements for the board of directors or to form a federal corporation in Canada.

• A director must be at least 18 years old, not being declared incapable by a court, and have not declared bankruptcy.
• Only an individual can be a director; a corporation can not be a director of a corporation.
• You need to provide the first and last names of the directors with their residential addresses and phone number.

Note: at least 25% of the board of directors must be Canadian residents if you want to form a federal corporation.

 

Step 4: Submit your articles of incorporation and pay the fee

Once your articles of incorporation are ready, you submit and pay $200.00 the current incorporation fees. If the registrar is satisfied with your filing requirements, he/she will issue the incorporation certificate. Congratulations! You are incorporated now.

 

After the incorporation:

 You may need to take the incorporation documents to the bank to open the bank account.

• You need to obtain the CRA business number.
• If you need to register for GST/HST and Payroll program account with CRA, you need to get that done. If you want to learn more about GST/HST or payroll in Canada, please either visit our blog “GST/HST” or “Hiring and employee.”
• If you want to transfer your personal assets to the corporation, you need to follow the rules of section 85 election of the Income-tax Act of Canada. Please visit our article “Transfer of assets between the Shareholder and the Corporation” to learn more about this topic.
• Every federal corporation needs to file an annual return, failing which a corporation can be dissolved. This annual return is not the annual corporate income tax return that you normally file with CRA.
• You need to maintain the corporate minute book of the corporation, which is to be kept at the registered office of the corporation.
• Every year you need to file an annual income tax return with CRA. To learn more about corporate taxation in Canada, please visit “Corporate taxation.”
• If you want to dissolve a corporation, you need to follow certain procedures. We are coming with an article in this regard very soon.

 

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Disclaimer: Information in the post has been presented for a broad and straightforward understanding. This is not a legal advice. RKB Accounting & Tax Services does not accept any liability for its application in any real situation. You need to contact your accountant or RKB Accounting for further information.