Before incorporating your business you may want to consider these seven legal tips.

1. Before deciding to incorporate your business, consider whether it is the best option or whether your business would benefit more from another legal structure such as a proprietorship or partnership. Please Read our blog on the Benefits of Incorporating a Business.
2. One of the considerations you will want to keep in mind when deciding whether to incorporate your business is income tax. Your business will be subject to different tax treatment depending on how it is structured. The tax treatment of corporations is often the biggest driver towards incorporation. Corporations often enjoy a lower tax rate then sole proprietorships. Other tax benefits to incorporating include tax deferral, income splitting, and the lifetime capital gains exemption on a sale of qualified small business corporation shares.
3. You have the option of incorporating your business in British Columbia, federally, or in another province. Think about where you plan to carry on business. If you plan to carry on business in more than one province, you may want to incorporate federally under the Canada Business Corporations Act (CBCA). Registering your corporate name federally allows you to carry on business under that name in any province.
4. Choose a unique name for your corporation. A company name must have a distinctive element, a descriptive element, and a corporate designation (i.e. “Limited”, “Limitée”, “Incorporated”, “Incorporee” or “Corporation” or the abbreviations “Ltd.”, “Ltée.”, “Inc.” or “Corp.”). Before registering your corporation, you must run a name search to make sure that name is not already in use. Note that this differs from a trade mark, which is a combination of letters, words, sounds or designs that distinguishes the company’s goods or services from others. A trade mark is registered separately from the corporation’s name and doing so will give you exclusive rights to use the trade mark throughout Canada for 15 years (a term that you can renew).
5. Who will be the director of your corporation and how many directors will there be? You should consult the governing legislation in your jurisdiction, as most place certain restrictions on who can act as director. For example, the CBCA requires that at minimum, 25% of the directors are residents of Canada. The British Columbia Business Corporation Act does not have a residency requirement.
6. While there is no requirement to execute a shareholders’ agreement when incorporating a business, you may find it beneficial to have one in place. A shareholders’ agreement is recommended where there are multiple shareholders involved in the financing and day-to-day management of the company. The agreement lays out the relationship between shareholders and can protect minority shareholders’ interests, while also protecting majority shareholders from oppression claims from minority shareholders.
7. Get familiar with the rights and obligations of your shareholders. They do not directly own the business or its assets, although their shares do give them certain rights with respect to the corporation, such as voting on resolutions. The nature of the shareholders’ rights will depend on the articles of the corporation and shareholders’ agreement, where there is one.

For a low flat fee, M.J. O’Nions, Lawyer & Mediator can incorporate your business for you and advise on how to structure your new corporation to keep costs and taxes at a minimum and prevent future disputes between shareholders. Please contact us at 604-449-7779 for assistance with incorporating your business.