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Company Formation

Company formation in Canada is fairly straightforward, without the hassle of several complicated steps.

The process of registration is by way of filing for federal incorporation and provincial registration via Industry Canada's online Electronic Filing Centre. The following documents need to be submitted:

• Form 1 - Articles of Incorporation
• Form 2 - Initial Registered Office Address and First Board of Directors
• Provincial registration form

There are four different incorporation options available:

• Incorporation of a numbered name corporation. A name search report must be obtained at a cost of $20 if a company wishes to incorporate under a name. The search report and articles must be submitted within 90 days of the production of the report.
• Incorporation with a pre-approved name or,
• Incorporation where approval of the name needs to be sought
• Incorporation of a pre-approved numbered name corporation

First of all you will have to decide what sort of 'structure' your business is:

Sole trader

• The simplest way to start a business.
• One person is responsible for controlling, managing and has total responsibility of the business including unlimited liability and debt.
• If a creditor makes a claim against a sole trader has the right to their assets both business and personal.
• A sole trader comes under provincial jurisdiction.
• If the sole trader trades under a name that isn't their own they must register the business in their local province.
• This registration will expire after three years and can be renewed.
• If the trader trades in their name, without adding any other words, you don't have to register the business.
• They cost very little to start up.

Partnerships

• Two or more people who combine their resources and work together as business partners.
• A lawyer must right up a contract agreement to protect each partner.
• Each partner will share the profits in accordance with the contract agreement.
• They have relatively low cost starting up costs.
• There is a possible tax advantage.

There are two types of partnership:

General Partnership: All of the partners are personally liable for debts and the business obligations. Therefore, each partner is responsible for each of the other partners and must assume the consequences of their actions.

Limited Partnership: Some of the partners who control and manage the business may take a great share of the profits. Other members are limited and only contribute the capital. These limited partners do not control the business but are liable for the debts to a certain level. A legal contract must be written outlining the partners, etc.In the province of Saskatchewan all partnerships must be registered.

Corporations

This type of company is a separate legal entity - so it's income and tax liability is separate from the people working there

• A Corporation can either be incorporated at provincial or federal levels.
• They are identified by the following terms: Limited, Ltd, Incorporated, Inc. Corporation or Corp.
• The appropriate term must be written on all documentation relating to the business.
• They have limited liability and ownership can be transferred.

There are three types of Corporations:

Private Corporation: Can be formed by one or more people. Canadian residents must make up the majority of the directors. You cannot sell shares or securities to the public. If none of the directors live in the province of Saskatchewan the company must choose a Power of Attorney who lives in Saskatchewan.

Public Corporation: This type of company issues securities to the public. You must file a prospectus with the Saskatchewan Securities Commission. You must use outside auditors. You must distribute bi-annual financial statements.

Federal Corporation: This type of business is incorporated federally under the Corporations Act. You must also register this business in each province you work.

For more information and incorporation documents you can contact:

Co-operatives

• This type of company is an organised and controlled by members Each member provides them and their partners with goods, services and other benefits.
• This gives democratic control, patronage dividends and open, voluntary membership.
• They are identified by the following terms: Co-operative, Limited and Ltd.
• The appropriate term must be written on all documentation relating to the business.
• There are three acts that relate to Co-operatives.
• Extensive recording keeping in required.

For more information on taxes, have a look on the Canadian Revenue Agency (CRA) website: www.cra.gc.ca

What sort of registrations will I have to complete?

You will probably need to apply for a BN (Business Number), GST (Goods and Services Tax), HST (Harmonized Sales Tax) and an Import/Export account (in that applies to your business).

What's a BN?

A BN is the business registration number for Canadian registered businesses. The number has 15 characters: nine digits to identify the business, two letters and four digits to identify the accounts held by the company e.g. GST (123456789 RT 0001) number which identifies a business with the Tax Office, other Government Departments, and other businesses.

Not everyone is entitled to an BN. Sole traders, partnerships, or corporations will be given a BN. A sole trader will receive one BN for all of their businesses (except any business that is registered as a partnership, trust or corporation).

If you don't have a BN, it will be issued at the same time as the GST/HST number. You can apply for your BN via:

• The Internet - The Canadian Revenue Agency website www.cra.gc.ca (Business Registration On-Line)
• Call +1-800-959-5525
• Post
• Fax
• Use an accountant
• Visit your local Canadian Tax Office.

If your business is in Quebec you can contact:

Offshore Companies

By choosing to incorporate an offshore company, business owners and  investors can set-up a business outside the jurisdiction of its operations. Offshore companies are traditionally, but not exclusively, incorporated for lower fees and taxes. Business owners must abide the regulations of the offshore jurisdiction, and must not trade within the jurisdiction.

The benefits are vast. As aforesaid, reduced tax and fees are often big factors when considering offshore incorporation. A company may also choose and offshore location to:

• Simplify set-up and maintenance - entrepreneurs may find bureaucracy and red tape less of an obstacle in offshore jurisdictions
• Assume anonymity - the names of owners and directors are not for public record, and references to the company may only be made in its registered agent
• Ensure legal protection - for instance, some jurisdictions favour corporate governance, meaning a company is only liable to offshore laws as opposed to those in its areas of operation
• Protect assets - business owners may opt to arrange their assets and transactions in such a way that protects them from liability

Characteristics of an offshore company:

• Memorandum and Articles of Association
• Certificate of Incorporation
• Registered Office/Agent
• Shareholders / Members
• Directors / Managers
• Company secretary
• Statutory Register
• Bookkeeping

Traditional locations for offshore incorporation are tax havens, such as the British Virgin Islands, Panama and Monaco. Other favoured areas include India, the Bahamas, Dubai, the Cayman Islands, Cyprus, Seychelles, Marshall islands, Delaware, Turks & Caicos Islands, Hong Kong, Jersey, Guernsey and the Isle of Man.

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