Business Incorporation in Ontario

Incorporating a business creates a separate legal entity that can own property, enter into contracts, earn income, incur obligations, and continue operating independently from its shareholders.

An Ontario business corporation may be suitable for a new business or for an existing sole proprietorship or partnership that is changing its legal structure.

Nobari Law Professional Corporation assists business owners with incorporating and organizing Ontario business corporations.

An Ontario business corporation is formed by filing articles of incorporation under Ontario’s Business Corporations Act.

The corporation is legally separate from its shareholders. It may:

• carry on business in its own name; 
• own business assets and property; 
• enter into contracts; 
• employ workers; 
• borrow money; 
• issue shares; and 
• continue to exist despite changes in its shareholders, directors, or officers. 

Shareholders own shares in the corporation but do not personally own the corporation’s individual assets. A corporation generally continues until it is dissolved, amalgamated, or otherwise brought to an end. 

This page concerns ordinary, for-profit Ontario business corporations. Regulated professionals who intend to practise through a corporation may need a professional corporation that satisfies additional professional and regulatory requirements.

A business owner may consider incorporation for several reasons.

Shareholders are generally not personally responsible for the corporation’s debts merely because they own shares.

However, limited liability is not absolute. Personal responsibility may arise where an owner:

• signs a personal guarantee; 
• becomes personally liable under a contract; 
• is responsible for their own wrongful conduct; 
• receives corporate funds improperly; 
• acts as a director in circumstances where legislation imposes liability; or 
• becomes responsible under another applicable law. 

Lenders and landlords may also require personal guarantees from the owners of a closely held corporation. 

A corporation can continue despite a change in its shareholders, directors, or officers. Its continued existence is not automatically affected by the death or departure of an individual owner. 

A corporation can issue shares to establish ownership interests and may provide a structure for bringing additional owners or investors into the business.

Where there will be multiple shareholders, the ownership structure and need for a separate shareholders’ agreement should be considered before the corporation begins operating.

Incorporation may provide tax-planning opportunities depending on the business income, expenses, ownership, amount withdrawn by the owners, and amount retained in the corporation.

Incorporation does not automatically result in tax savings. Business owners should obtain accounting and tax advice before incorporating or transferring an existing business into a corporation.

Nobari Law provides legal incorporation and corporate-organization services and does not provide tax, accounting, or financial-planning advice.

An Ontario corporation may be incorporated under a numbered name or a chosen legal name.

A named corporation uses a chosen legal name, such as:

ABC Consulting Inc.

A proposed named corporation generally requires an Ontario-biased or weighted NUANS name-search report. The report must be dated no more than 90 days before the articles are submitted. 

A NUANS report identifies similar existing and proposed names, but it does not guarantee that the proposed name will be accepted or prevent another business from objecting to its use.

A numbered corporation receives a legal name based on its Ontario corporation number, such as:

12345678 Ontario Inc.
 

A NUANS report is generally not required for a numbered corporation. The corporation may separately register and operate under a business name where appropriate.

The choice between a named and numbered corporation will depend on the owner’s branding, business plans, and intended use of the corporation.

Business incorporation generally involves more than filing the articles. The corporation should also be properly organized and its required records established.

Before filing the articles, information should be obtained concerning:

• the proposed shareholders; 
• the proposed directors and officers; 
• the intended business activities; 
• the corporation’s legal name; 
• the registered-office address; 
• the number and classes of shares; 
• any restrictions required in the articles; and 
• any instructions received from the client’s accountant. 

A straightforward owner-operated business may use a relatively simple structure. A corporation involving multiple shareholders, investors, special share classes, or tax planning may require additional legal and accounting advice.

The articles of incorporation establish the corporation and set out important information concerning its legal structure.

The articles may address:

• the corporation’s legal name; 
• its registered office in Ontario; 
• the first directors; 
• the authorized classes of shares; 
• the rights and restrictions attached to those shares; 
• restrictions on transferring shares; 
• restrictions on the corporation’s business activities; and 
• other provisions required for the intended corporate structure. 

Once the filing is accepted, Ontario issues a Certificate of Incorporation.

Receiving the Certificate of Incorporation creates the corporation, but further documents are normally required to organize it.

Corporate organization may include:

• adopting corporate by-laws and initial resolutions;
• confirming the directors and appointing the officers;
• approving the financial year-end and banking arrangements;
• preparing the initial share subscriptions, issuances, and certificates;
• establishing the required corporate and securities registers;
• preparing an individuals-with-significant-control register, where applicable; and
• establishing an electronic corporate minute book.

Ontario corporations must maintain prescribed records, including their articles, by-laws, shareholder resolutions, director information, securities register, and other applicable corporate records. 

An Ontario corporation must file its initial return within 60 days after incorporation. The filing records prescribed information about the corporation, including its registered office, directors, and officers. 

The initial return is separate from the articles of incorporation and should not be overlooked after the corporation is formed.

Shareholders, directors, and officers have different roles within a corporation.

Shareholders own shares in the corporation. Their voting, dividend, and other rights depend on the class of shares they hold and the corporation’s governing documents.

Directors manage or supervise the management of the corporation’s business and affairs. They approve important corporate decisions and have legal duties to the corporation.

Officers carry out roles assigned by the directors, such as president, secretary, or treasurer, and may manage the corporation’s daily operations.

In a small owner-operated corporation, the same person may be the sole shareholder, director, and officer. Where several people are involved, their roles and authority should be clearly established.

The articles determine which classes of shares the corporation is authorized to issue and the rights attached to each class.

A share structure may address:

• voting rights; 
• entitlement to dividends; 
• entitlement to property on dissolution; 
• redemption or retraction rights; and 
• other conditions affecting the shares. 

A straightforward corporation may require only a basic share structure. Where the structure is intended to implement tax planning, an estate freeze, family ownership, investor rights, or another specialized arrangement, instructions should be obtained from an accountant or qualified tax professional before the articles and share documents are finalized.

Where two or more people will own the corporation, they should consider how decisions will be made and what will happen if their relationship or circumstances change.

A separate shareholders’ agreement may address matters such as:

• management and voting; 
• financial contributions; 
• payment of salaries or dividends; 
• restrictions on transferring shares; 
• the departure, disability, or death of a shareholder; 
• resolving disagreements; 
• purchasing another shareholder’s shares; and 
• selling the business. 

A shareholders’ agreement is not automatically created as part of an ordinary incorporation. It is a separate legal document and service that should be discussed where the corporation will have more than one owner.

Incorporating does not automatically transfer an existing sole proprietorship or partnership into the new corporation.

The business owner may need to address:

• transferring business assets; 
• assigning contracts or leases; 
• moving employees to the corporation; 
• transferring business names, licences, or permits; 
• opening new banking and merchant accounts; 
• changing invoices and agreements; 
• transferring intellectual property; 
• registering new CRA program accounts; and 
• dealing with tax consequences arising from the transfer. 

The legal and accounting steps will depend on the type of business and the assets and obligations being transferred.

A new corporation should not use or claim ownership of assets, contracts, or accounts belonging to the former business unless the applicable transfer requirements have been completed.

An Ontario corporation receives a nine-digit federal Business Number and a corporation income-tax program account as part of the provincial incorporation process. Additional CRA program accounts may be needed depending on the corporation’s activities.

These may include:

• a GST/HST account; 
• a payroll deductions account; 
• an import-export account; or 
• another applicable CRA program account. 

The need for additional registrations depends on the corporation’s business activities and tax circumstances. CRA registrations, tax elections, bookkeeping arrangements, and accounting advice are separate from the legal incorporation work unless expressly included in the retainer. 

An Ontario corporation has continuing legal, corporate, and tax obligations after incorporation.

Depending on the corporation, these may include:

• maintaining its minute book and required corporate registers;
• documenting changes to directors, officers, shareholders, and share ownership;
• recording important corporate decisions;
• keeping its Ontario Business Registry information current;
• filing required notices and annual returns;
• maintaining its individuals-with-significant-control register;
• meeting applicable tax-filing obligations; and
• maintaining required business licences or permits.

Ontario corporations must file an annual return through the Ontario Business Registry within six months after the end of their fiscal year and generally must report changes to their registry information within 15 days.

Privately held Ontario corporations must also maintain information about individuals with significant control, review that information at least annually, and update it within 15 days after becoming aware of a relevant change.

Tax returns, bookkeeping, and accounting advice are separate from the legal incorporation work unless expressly included in the retainer.

A client seeking to incorporate an Ontario business may be asked to provide:

• valid, current identification and any additional information required for identity verification;
• the proposed corporate name and a brief description of the intended business;
• the proposed registered-office and mailing addresses;
• the names and addresses of the proposed shareholders and directors;
• the proposed officers and their positions;
• the proposed share structure, initial share issuances, and amounts to be paid;
• instructions from an accountant, where applicable; and
• information about any existing business that may be transferred to the corporation.

Additional information may be required depending on the ownership, share structure, business activities, and scope of the retainer.

Do not send original documents, identification, complete account numbers, passwords, or other sensitive information unless requested by Nobari Law Professional Corporation. If requested, please use the document-sending method confirmed by the firm.

Depending on the proposed corporation and agreed scope of the retainer, Nobari Law Professional Corporation may assist with:

• reviewing the proposed Ontario corporate structure; 
• reviewing the proposed corporate name; 
• obtaining an Ontario NUANS report where required; 
• preparing and filing the articles of incorporation; 
• preparing corporate by-laws and organizational resolutions; 
• appointing the initial officers; 
• preparing initial share subscriptions and share certificates; 
• preparing the directors’, officers’, and securities registers; 
• preparing the initial individuals-with-significant-control register, where applicable; 
• preparing an electronic corporate minute book; 
• filing the corporation’s initial return; and 
• reporting to the client after completion. 

Additional services, such as shareholders’ agreements, transfers of an existing business, corporate reorganizations, tax-driven share structures, licensing matters, and ongoing corporate maintenance, are separate from a basic incorporation and will depend on the circumstances and agreed scope of the retainer.

Nobari Law provides legal incorporation and corporate-organization services. Tax, accounting, valuation, financial-planning, and business advice should be obtained from the appropriate qualified professionals.

Proper incorporation involves establishing the corporation’s legal structure, issuing its initial shares, completing its organizational documents, creating its required records, and filing its initial corporate information.

Contact Nobari Law Professional Corporation to discuss incorporating and organizing a business corporation in Ontario.