Running a business in Ontario can be exciting. And the good thing is that you don’t need to hold a master’s degree in business administration to launch and run a successful company. But there are important choices you’ll need to make from the start to realize success. One of them is the selection of your business structure. The choice of a business structure will majorly depend on your preferences. One common structure for business in Ontario is a corporation, which is what this article will be discussing about. So read on.
An Overview Of A Corporation
A corporation is a legal business structure that’s separate and distinct from its members. Under the law, corporations have legal personalities. They can enter contracts, hire employees, sue and get sued, and pay taxes in their own names.
Owners of a corporation are known shareholders. They contribute funds to run the business in exchange for equity. In other words, they become company shareholders, and their reward is dividends.
There are several benefits of incorporating in Ontario. For instance, it allows you to secure your assets. Owners of a corporation aren’t responsible for the company’s debts. Your personal assets can’t be used to cover the business liabilities.
Also, corporations have greater access to capital. Since most corporations sell ownership through public stock markets, they can easily raise funds by selling shares. This accessibility to funds is an advantage other business structures don’t enjoy.
Incorporating In Ontario
There are many steps when forming a corporation in Ontario. They include the following:
1. Create A Name For Your Business
When you want to incorporate in Ontario, the first step is to select a name for your business. For marketing purposes, your corporation’s name needs to differ from those of other businesses. This way, prospects can quickly identify your business.
To secure a unique name for your corporation, visit the website of the secretary of state to search for the availability of the name. Once available, you can reserve it by paying a reservation fee. This ensures no one else can register their business with your preferred company name.
When creating a corporation name, there are some guidelines to adhere to. For example, the name must contain an entity identifier such as a corporation, incorporated, or limited. Plus, the law prohibits the inclusion of certain words such as bank, credit union, and trust in corporation names. Always remain compliant with the law when naming your corporation.
2. Create Articles Of Incorporation
Once you choose the name of your business, the next step is to secure articles of incorporation. Also known as a certificate of formation, articles of incorporation are a set of legal documents that a corporation files with the state government to establish itself as a legal business entity.
Here is the information contained in the articles of incorporation:
- The name of the business
- The name of the registered agent
- The type of the corporate legal structure, which may include C-corporation, S-corporation, non-profit corporation, or another category
- The duration of the business
- The amount of share capital available to your corporation
- The names and addresses of all company directors.
There are several benefits of creating articles of incorporation. For instance, these documents allow the corporation to run or operate as a separate and distinct legal entity from its members.
Moreover, the articles of incorporation enable businesses to issue shares, unlocking new possibilities for raising capital with ease. By tapping into the vast potential of public investment, companies can not only fuel their growth but also elevate their corporate visibility, solidifying their presence in the market. Issuing shares can be a strategic move, transforming a corporation into a formidable player in the business landscape.
3. Appoint Initial Directors
Another step when incorporating in Ontario is to appoint a board of directors. These are the individuals you select to represent shareholders. Every corporation is legally required to appoint a board of directors. Directors are the overseers of a business.
Here are the important functions of a board of directors in a corporation:
- Hiring and firing top-level management
- Establishing dividend policies
- Maintaining business resources
- Setting company goals
- Supporting the executives in managing the business
- Creating option policies.
4. Create Corporate Bylaws
Incorporating in Ontario involves creating a new business with shareholders, directors, and other officers. It’s advisable to create corporate bylaws to clarify every officer’s role, duties, and responsibilities. A corporate bylaw is a document that creates an internal structure to guide daily business operations.
Some of the information to include in your corporate bylaws include the following:
- Name Of The Business: At the beginning of your bylaws, include the name of your business. It’s also important to indicate the physical location of your company.
- The Objective Of The Business: it’s important to tell readers about the purpose of your corporation. To achieve this, include the mission statement in your bylaws. This can be beneficial when making a company’s growth and expansion decisions.
- Structure Of The Board: Here, you’ll provide the structure of the board, including the total number of directors, their qualifications, and length of stay. Also, explain how directors are removed from the office and how the vacancies are filled.
5. Get An Employer Identification Number
As noted earlier, corporations pay taxes in their own names. But for that to happen, a corporation must have an employer identification number (EIN).
Apart from tax payments and filings, you’ll use the EIN to open a business bank account. You can create EIN by visiting the internal revenue service website and filling in all the required company information.
6. Apply For a Business License And Other Permits
You’ll need to have a business license to run your company. The government won’t allow you to run the business without proper licensing. Therefore, ensure you get the master’s or general license. You may also be required to apply for other licenses specific to your business and industry. For instance, some businesses, such as restaurants and alcohol, may require additional licenses.
Takeaway
One of the common business structures when launching a company in Ontario is a corporation. Once formed, a corporation becomes a separate entity from its owners. It’s one of the structures to protect personal properties from the business’s liabilities. Make sure you follow the right steps when forming a corporation. Choosing a business name, creating articles of incorporation, appointing directors, establishing bylaws getting an EIN, and applying for licenses are steps for incorporating in Ontario.