Starting your own business is one heck of an adventure, and if you happen to be in Ontario, well, then incorporation can be a real smart move to make for many entrepreneurs. Besides, incorporation offers protection from liabilities, tax benefits, and also gives a professional edge to a company that might differentiate it from other competitors. This blog post will break down how to incorporate a business in Ontario, what it means, and why it is a great idea for your startup. Let’s get rolling and explore how incorporation in Ontario works in a crystal clear, fun, and straightforward way!
What Does It Mean to Incorporate a Business in Ontario?
When you incorporate a business in Ontario, you separate your business from your personal self as a legal entity. Your business parts away and becomes its own “person” in the eyes of the law. This comes along with several advantages:
- Limited liability protection: No action against the corporation can put liens on personal assets.
- Potential tax advantages: Many corporations pay lower tax rates.
- Credibility: Incorporated businesses attract customers and investors right away.
Why Incorporate a Business in Ontario?
Ontario is a great province to run a business. Register a business in Ontario and you will gain a lot of perks. With its well-rounded growing economy, assurance of access to a skilled workforce, and government support for start-up businesses, it is no wonder that entrepreneurs head to this particular province in droves. Popular startups such as Shopify, FreshBooks, and Ecobee have all started their journey inside Ontario, proving the fact that it is a land of opportunities. Be it a tech startup or a cozy coffee shop, when you incorporate a business in Ontario it lays the foundation for growth that is sustainable. Now it is your turn to register a business in Ontario!
How to Incorporate a Business in Ontario
Here is a simplified guide that will help you understand how to register a business in Ontario:
1. Name Your Business
When you name your business – you create your brand. Ensure it is unique and complies with the following rules:
- It has to be unique and different from all the other registered business names in Ontario.
- It should not include words that are offensive or misleading.
- It must include a legal term, for example “Inc.,” “Corporation,” or “Limited.”
Example: If your business will sell and deliver plants, you can name your corporation “GreenGrow Inc.”
How to Select the Proper Name when You Incorporate a Business in Ontario
- Take advantage of sources like the Online Business Registry to check if the name is free:
- Keep it short, memorable, and relevant to your business.
More information about naming a corporations in Canada can be found here:
2. Decide on Provincial or Federal Incorporation
You have the option of incorporating, provincially, or federally across Canada.
Quick Comparison:
Ontario Incorporation
Federal Incorporation
3. Filing a NUANS Name Search
Before you can incorporate a business in Ontario, you will need to confirm that your desired name is available by obtaining a NUANS (Newly Upgraded Automated Name Search) Report. This costs about $13 and identifies conflicting names. Obtain a NUANS Report from a trusted service provider – NUANS Canada. They will conduct an Ontario corporation search and create a list of all similar existing business names.
4. Articles of Incorporation
The next step when you incorporate a business in Ontario is to submit the Articles of Incorporation to the Ontario government.
What this document needs to contain:
- Your organization’s name.
- The organization’s address.
- An outline of the share structure of the corporation and the list of the first directors.
You can do your Ontario Incorporation Package via Incorp Pro, and it starts at $399 CAD + Tax.
5. Register Your Business
Once you are incorporated, you will have to register your business with the government for tax and regulatory purposes. Don’t forget:
- To obtain a Business Number (BN) from the Canada Revenue Agency (CRA).
- To register for a GST/HST account (If your revenue is more than $30,000 annually).
We can simplify the process of registering a business in Ontario and register all the CRA Accounts (like GST/HST, payroll, tax account) on your behalf. these services in the package when you order an Ontario Corporation.
6. Establish Corporate Bylaws and Shareholder Agreements
Now that your business is official, set rules on how the business will operate. This includes preparing key documents that outline the governance and management of your corporation.
Corporate By-laws:
Corporate by-laws are essential for setting out the internal rules and regulations of the corporation. They detail:
- The roles, responsibilities, and qualifications of directors and officers.
- Procedures for meetings of directors and shareholders.
- Information about shares, including their rights and restrictions.
- How dividends are issued.
- Other important operational guidelines.
Shareholder Agreement:
A shareholder agreement is an essential document that defines the relationship between the shareholders and the corporation. It establishes:
- The rights and responsibilities of each shareholder.
- How disputes are resolved.
- Rules for the transfer or sale of shares.
- Protections for minority shareholders and more.
These documents are among the most important when incorporating a business in Ontario.
Additional Key Documents Required at the Time of Incorporation:
- Initial Corporate Resolutions
- Share Certificates
- Director and Officer Consents
- Corporate Ledger of Directors & Officers
- Central Securities Register
It all may seem overwhelming but remember there are service providers like Incorp Pro who can help you with preparing all you need to get started.
Advantages of Incorporating in Ontario
1. Tax Advantages
Incorporation can save you in terms of taxes. For example, the corporate tax rate is lower than the personal tax rates in Ontario. In addition to that, small businesses may fall under the Small Business Deduction category, so a part of their taxed income could be exempt.
2. Availability of Finance
Financial institutions, investors, and grant providers tend to favor incorporated businesses when granting funding. This has been the case for some Ontario startups, such as Wealthsimple, which have successfully sourced finance for scaling. This is another compelling reason to incorporate a business in Ontario.
3. Perceived Trust and Professionalism
Suppose you are hiring a contractor. Whom would you trust more: “John’s Roofing” or “John’s Roofing Inc.”? Incorporation adds legitimacy to your business, building trust with clients.
Examples of Successful Startups in Ontario
Need some inspiration? Here are a few startups that started out their journeys in Ontario:
- Shopify (Ottawa) – A global e-commerce platform helping businesses sell online.
- Ecobee (Toronto) – Makers of smart thermostats and home automation products.
- Canva (Waterloo) – Very well known for making graphic design approachable and unintimidating.
- Ritual (Toronto) – As the on-demand food ordering app loved by urban centers around the world, these companies all started small and grew into major players. Incorporation played a role in their successes through providing a solid core business foundation.
Register a business in Ontario and you have a chance to join the list of these successful businesses.
Can I Incorporate a Business in Ontario as an Uber Driver?
Yes, an Uber driver in Canada can set up their own corporation. If you incorporate a business in Ontario, it can provide a lot of benefits to the self-employed individual, including Uber drivers. The following is a basic overview of why and how they could:
Why should any person incorporate a business in Ontario as an Uber driver?
- Limited Liability: Basically means personal assets are separated from business liabilities and that saves the driver’s personal assets against any litigation filed against the business by others or against debts that become due.
- Tax benefits: Better corporate income tax rates, income splitting, deferral of income to later years by leaving the profits inside the business.
- Professional Image: Running a business as a corporation may lend an air of professionalism to the partners or clients.
- Expense Deductions: Most on-the-business expenses, such as fuel, vehicle maintenance, and insurance, amongst others, can be deducted through the corporation.
Future scaling-up: A corporation can provide the needed platform for scaling when the driver decides to upscale the current business into logistics, fleet management, or any other transport services.
Steps to Incorporate a business in Ontario as an Uber Driver
1. Decide on a Corporate Structure:
- Federal incorporation: If it operates across Canada.
- Provincial incorporation: The business is restricted to only one province.
2. Choose a Business Name:
Conduct a NUANS Report from Industry Canada if not a numbered corporation, in order to confirm that the name is unique.
3. Register the Corporation:
- File incorporation documents with the selected jurisdiction (federal or provincial).
- Include necessary information such as directors, share structure, and registered office address.
4. Obtain a Business Number BN:
Register for a BN with Canada Revenue Agency for taxes.
5. Register for the GST/HST:
If the annual income of this business surpasses $30,000, then one is supposed to register for GST/HST for taxation purposes.
6. Open a corporate bank account:
Open a business account to keep personal and business finances separated.
7. File Annual Returns and Remain Compliant:
File annual corporate returns and maintain the records of the corporation in good standing.
8. Key Things for Uber Drivers
- Insurance: You should obtain an insurance policy serving both personal and commercial purposes.
- Bookkeeping: Record incoming and outgoing money, including records of taxes owed or paid.
- Tax Filing: A company needs to be filed for taxes separately, unlike the personal ones.
Ontario Incorporation: Frequently Asked Questions
1. Are the Costs of Incorporation in Ontario Very High?
The costs are relatively low. The minimum of the provincial incorporation fee to incorporate a business in Ontario is $300. There might be additional costs, for example, for a NUANS report starting at $13, and for legal advice if needed.
2. Can I Incorporate on My Own?
Yes! The process is easy and can even be done online. However, if you are unsure of any steps in the way, it is well worth consulting a corporate registry like Incorp Pro.
3. What Extra Fees Should Be Paid?
Yes, corporations need to file an annual return and pay a small fee; this is usually less than $100. That’s just part of maintaining your business in good legal standing.
Ready to Take Off?
Since you have learned how to incorporate a business in Ontario, now is the time for you to take action. Incorporation might seem to entail a lot of work, but it really is worth it for peace of mind and the advantages that come along with the procedure. Remember: Giant companies like Shopify and Ecobee started from an idea. Your business could be Ontario’s next success story!