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WHAT IS A CORPORATION?
A corporation is a type of business vehicle that acts as its own separate legal entity. This means that a corporation can enter into contracts, own property in its own name, and hold partnership status. When registering a corporation, it is important to decide whether you plan to carry on business only in the province of Ontario or if you plan to set up offices in multiple provinces. If you plan to only carry-on business in the province of Ontario, then you may decide to incorporate provincially under the Ontario Business Corporations Act. Alternatively, if you plan to operate multiple offices in different provinces then you may consider incorporating in each province you operate in or incorporating federally under the Canadian Business Corporations Act.
HOW DO I INCORPORATE MY BUSINESS IN ONTARIO?
Incorporating a business may be more complex than creating a sole proprietorship or general partnership. When deciding on a business name for your corporation, you can choose a unique name or receive a numbered name for your federal or Ontario corporation. If you choose a unique name for the corporation, then you must conduct a NUANS search of your proposed business name to ensure it is not taken, reserved, or trademarked. It is important to note that if your corporation is provincially incorporated in Ontario, then your business name is only protected in the province of Ontario. To ensure your proposed business name is protected across Canada, it may be in your best interest to federally incorporate your business.
Next, you must file articles of incorporation with the appropriate Ontario or federal authority, which set out your corporation’s name, the share structure, any share restrictions, the number of directors, any restrictions imposed on your business, and any other provisions you or your legal representative may want to include in the articles of incorporation. Once your articles of incorporation are prepared in draft format, they must be signed by the directors and the applicable fee must be paid before your articles of incorporation are received for registration by the Ministry of Public and Business Service Delivery in the case of Ontario corporations and Ministry of Innovation, Science, and Economic Development Canada in the case of a federal corporation. While it is possible to incorporate a corporation on your own, it is always advised to contact a business lawyer to assist you with the incorporation of your business.
THE ROLE OF SHAREHOLDERS
The shareholders of a corporation are the owners of its outstanding shares, each owning a specific number of shares in the corporation. Since a corporation is its own separate legal entity, shareholders are not liable for the business’s liabilities, unless they make a personal guarantee for a debt or liability. The role of a shareholder includes but is not limited to electing the directors of the business, deciding director remuneration, and approving the business’s financial statements.
THE ROLE OF DIRECTORS
The directors of a corporation hold the responsibility of supervising all activities of the business and are generally responsible for electing the officers of the corporation. Directors have certain legal obligations to the corporation, such as a duty of care and good faith and acting in the best interests of the corporation. This is often referred to as the directors’ ‘fiduciary duty’ to the corporation. It is important to note that the directors of a corporation may have personal liability for certain aspects of the business being conducted by the corporation. If you are asked to act as a director of a corporation, it is important for you to consult an experienced business lawyer to discuss your personal liability in acting as a director of the corporation.
THE ROLE OF OFFICERS
The officers of the business are elected by the directors and oversee all day-to-day operations. In Ontario, a corporation must have at least a President and Secretary elected as officers, however, there is no requirement that these officer roles are held by separate individuals or non-directors. Other officer positions may include Chief Executive Officer, Vice President, Treasurer, and Chief Information Officer.
At Jahanshahi Law Firm, our business law team can help you navigate the incorporation process and provide you with legal advice regarding compliance with Ontario and federal statutes. Contact us today to set up an initial consultation with a business lawyer where we can answer any questions you may have about the incorporation process.
Disclaimer:The information contained in this article is not to be construed as legal advice. The content is drafted and published only for the purpose of providing the public with general information regarding various real estate and business law topics. For legal advice, please contact us.
About the Author:
Shahriar Jahanshahi is the founder and principal lawyer at Jahanshahi Law Firm with a practice focus on representing business star-ups and investors in the province of Ontario. For further information about Shahriar Jahanshahi, click here.
