Frequently Asked Questions
Q - I have a very small business. Should I form a corporation or should I register a business name?
if you are not sure if you should have a business name or a corporation, please visit our section Starting a Business, Business Entities, for more information about corporations and business names.
Q- What's the difference between a business name (sole proprietorship) and a corporation?
Business names are business names registered to an individual or a corporation. You must register a business name if you or your business:
* is engaged in business for trading, manufacturing, contracting or
mining purposes
* is not associated in partnership with any other person or persons
* uses as his business name some name or designation other than his own
* uses his own name with the addition of "and company" or some
other word or phrase indicating a plurality of members in the firm.
Q- Is it better to incorporate or to register (as a sole proprietor/partnership) one's business?
This depends on the particular situation: the type and the size of business, the risks involved, the number of people involved, the geography covered and the tax situations of the individual involved.
Q- What is a Sole Proprietorship?
A sole proprietorship is a business consisting of one owner. That owner may be either an individual or a corporation. If the owner is an individual (who is also personally liable for all the debts of the business) and carries on business under a name other than his or her personal name, that name must be registered under The Business Names Registration Act.
Q- What is a Partnership?
A partnership is a business owned by one or more individuals or corporations (in any combination). Within a partnership, each partner is potentially liable for all debts of the partnership. If the partnership carries on business under a name, that name must be registered under The Business Names Registration Act.
Q- Where may I register a sole proprietorship or partnership?
Sole proprietorships and partnerships are registered at the provincial level.
Q - If I register a business name, can anybody else use that name?
The same business name can be used by many people. Registering the name in your province does not mean that you own that name. You could have legal problems if you use a name that is the same, or nearly the same, as an existing trade name, partnership name, corporation name, or trade mark. Choose your trade/business name carefully.
Q- Once my business name is registered, am I registered across Canada?
No. Your business name is registered only in the province where you file your business name registration. If you are interested in doing business in other provinces, you need to register your business name in each province where you are interested in doing business.
Q- Once my business name is registered, how often must I renew the registration?
Your business name must be renewed every three, four, or five years, depending on the province in which registration occurs, or it will expire.
Q- What do I do if there is a change of address?
You file a Change of Address form with the Companies Office if:
* the business moves
* the owner(s) move(s)
* the mailing address changes
Q- Do I need a license to operate?
Registration of your business name doesn't give you a business licence. You may have to apply for a municipal and/or a provincial licence.
Q - Do I have to carry workers compensation?
Most businesses who employ workers, even on a casual basis, must register with the Workers Compensation Board and provide coverage for their workers.
Q - Should I wait until my business name is registered before ordering business cards and stationary?
Yes. If, for some reason, your business name cannot be registered, the money you spent on stationery has been wasted.
Q- What do I need to do to open a bank or credit union account?
A bank or credit union may ask you for a processed copy of your business name registration form before opening an account for you. Contact your financial institution to be sure.
Q- What is a corporation?
Federal and Provincial Business Corporations Act defines a corporation as "a body corporate incorporated or continued under this Act and not discontinued under this Act". A corporation has the capacity, and, subject to the Business Corporations Act, the rights, powers and privileges of a natural person. A corporation has the capacity to carry on its business, conduct its affairs and exercise its powers in any jurisdiction outside its province of incorporation to the extent that the laws of that jurisdiction permit.
Q- What are the benefits of incorporation?
*Limited liability: potential loss limited to amount invested in the
corporation.
*Perpetual existence: corporation continues on after the death of the
individual.
*Tax advantages: accountants will recommend incorporation once revenues
reach a certain point.
*Raising capital: corporate form of business organization easier to raise
capital through the sale of shares.
Q- What kind of businesses can incorporate under Federal and Provincial Business Corporation Act?
Almost any type of business may incorporate under Federal and Provincial Business Corporation Act. However, mortgage, banking, insurance, loan and trust companies, and other Financial Institutions, cooperative, Chambers of Commerce as well as not-for-profit corporations are incorporated under different statutes.
Q- Who can form a corporation?
One or more individuals who are 18 years of age or older, is not of unsound mind and who are not a bankrupt may form a corporation under the Canada Business Corporations Act (CBCA) or under Provincial Business Corporation Act
Similarly, one or more companies or "bodies corporate" may incorporate a company.
These persons are called incorporators. An incorporator (individual or corporation) may form a corporation whose shareholders, officers and directors are other persons, or may serve as the sole director, officer and shareholder of the company. An incorporator is also responsible for organizational procedures, such as filing the articles of incorporation and designating the first directors.
Q- Is a lawyer needed to incorporate?
A lawyer is not necessary to incorporate.
Q- What is a NUANS® name search report?
The NUANS® (Newly Updated Automated Name Search) name search report is a five-page computer printout of (Provincial and Federal) business names and trade marks registered in Canada that sound or look similar to a proposed name. It is required when a corporation incorporates or changes its name, for example, to ensure that the proposed name does not already exist or is not confusingly similar to another corporation's name, business name or trade mark.
Q - If a company incorporates at the federal level, do they need to register anything with the provinces?
Yes. Whether a company is incorporated federally or provincially, they will likely be required to register their business in one or more province(s) and/or territory(ies) where they carry on business.
Q- What is a registered office?
The registered office is the location within the province of incorporation where the records of the corporation are maintained.
Q- Can a corporation have a P.O. Box (Postal Office Box) as the Registered Office address?
No, the registered office must be a street address.
Q- What is a director?
A director is an individual, at least 18 years of age, who is elected by the shareholders to manage the affairs of the corporation. An individual is disqualified from being a director if:
* he or she has been found of unsound mind by a court in Canada or elsewhere;
or
* he or she has the status of bankrupt.
Can a corporation be a director on the Board of Directors?
No, directors must be individuals.
Q- Which is the responsibility of the directors?
If you are a director of a business corporation, co-operative, credit union or non-profit corporation, you have certain duties and obligations which may result in personal liability if you fail to discharge them. These duties arise from statute, such as the Act under which the corporation is incorporated, and from the special relationship which exists between a director and the corporation that he or she serves. These duties may also apply to an officer of the corporation.
Every director and officer of a corporation may be liable if he or she fails to:
• act honestly, in good faith and in the best interests of the corporation;
• put the interests of the corporation before his or her personal interests
or the interests of
others;
• be informed about and understand the business and affairs of the corporation;
and
• use his or her knowledge and expertise for the benefit of the corporation.
A director may also be held personally liable for:
• misusing the corporation's property;
• condoning illegal or improper acts of employees, officers or other directors;
• declaring dividends which render the corporation insolvent;
• wages of employees;
• deductions and premiums such as employees' income tax, unemployment
insurance and
workers' compensation; and
• unpaid taxes such as income tax and GST.
In the case of non-profit corporations, liability of directors for any
loss suffered by any person may be
limited in a civil action if the director or officer acted in good faith.
Directors may purchase insurance to protect themselves from liability, however, the insurance will only cover a director who has acted in good faith. For example, directors cannot insure themselves against the consequences of stealing from the corporation. Similarly, a director cannot be indemnified by the corporation with respect to illegal or dishonest acts.
This is not an exhaustive review and is intended only
as general information and not as a statement of law. While there is no
foolproof way for a director to avoid liability, you can reduce your chances
of
being found liable by being aware of your duties and responsibilities.
If you are uncertain about any of your activities as a director or officer
of a corporation, you should seek the advice of a qualified legal advisor.
Criminal Liability of Directors and Officers
Directors and officers could be held criminally liable
for any criminal offence that they commit in the
course of their duties.
Criminal Liability of Corporations
Corporations can also be held accountable for Criminal Code offences. Newly passed legislation permits the combined acts of corporation’s representatives and senior officers to constitute criminally negligent offences. This legislation also holds corporations accountable for criminal offences when senior officers commit an offence to benefit the company, direct the work of other employees to commit an offence, or fail to take all reasonable measures to stop an employee from committing an offence.
The court can now impose a number of conditions on corporations when they are found guilty of committing a criminal offence. Those conditions could include such things as mandating that corporations change their policies and procedures, making the corporation publicly announce their conviction, ordering them to pay restitution, and/or giving them up to a $100,000 fine for summary conviction offences.
Q- Do I need a corporate seal?
Corporate seals are not required under The Business Corporations Act, although some banks and lending institutions may require that you have one. They are available through any business that makes marking devices. The full corporation name must be shown on the seal. Most manufacturers have samples.
Q- What is a corporate annual return?
An annual return is information that the corporation must file for the year ending on the anniversary date of its incorporation or registration, or otherwise coming under the authority of the Business Corporations Act. A corporate annual return details:
* the corporate access number
* the name of the corporation
* the corporation address
* the applicable period the report applies to
* whether changes have been made to the directors
* a list of shareholders, their addresses, and what percentage of voting
shares they hold.
Q- Is the annual return the same as my tax return?
No, they are separate documents and filed with different government agencies.
Q- How long do I have to file an annual return?
An annual return is due no later than the last day of the month following the anniversary month. For example, if the corporation was incorporated in June 2007, its annual return would be due no later than July 31, 2008 and all years ending July 31 thereafter.
Q- What will happen if I do not file my annual return?
Your corporation will eventually be struck from the register. For example, if the annual return was due June 2006 and it is not filed with the Registrar, the corporation would be struck off the register December 1, 2007.
Q- How do I change the name of my corporation or any other item in the Articles of Incorporation?
To change (or amend) any provision contained in the Articles of Incorporation, you must file Articles of Amendment.
Q- How do I change my registered office?
You can change your registered office by filing a Notice of Change of Registered Office.
Q- How do I change the directors of the corporation?
When any change of directors occurs, a Notice of Change of Directors must be completed and filed within fifteen days of the change.
Q- What if I want the corporation to do business under more than one name?
If you want to do business under more than one name there are two options:
1) Form another corporation, which can be a subsidiary corporation;
2) Register a Business Name (also known as trading name) under The Business
Names Registration Act, that is owned by the corporation.
Q- Can a corporation incorporate another corporation?
Yes, a corporation can be an incorporator.