There’s a lot to consider when considering forming a company. You might be unsure of where to start but want to better understand what to expect before you move forward. We’ve made a list of five decisions that really stand out for us in the beginning. Every company is different, so there may be more decisions you’ll need to think about, but we hope this list helps to at least get you started on the right track!
1. Where Will the Head Office Be?
What province/territory will the head office be in? This will determine where you need to incorporate (if you choose to incorporate Federally, you’ll still need to register your company in the province or territory that the head office is located in).
Do you have an office in mind that you own/rent? Do you plan to use your personal address? The registered head office address cannot be a P.O. Box. It’s important to understand that the head office of a corporation is public information. If you plan on running your corporation from home but don’t want to use your personal address, renting an office address is often available for a fee. These office rentals typically collect your mail for you and accept deliveries (some offer other services as well – but they all vary).
Before getting started, you may need to consider where you want your head office to be.
2. Who Will the Shareholders Be?
The shareholders are the owners of the company. They get to choose who the directors are and a host of other decisions. There can be one shareholder that owns 100% of the shares of a company or multiple shareholders that share ownership of a company. Depending on how the Share structure is laid out in the articles of the Corporation, different shareholders can have different rights (e.g., voting vs. non-voting rights).
If there are multiple shareholders, you may want to discuss entering into a Shareholders Agreement so you are well prepared for events that may arise down the road (such as disputes, death, divorce, etc.).
If you want to have more than one class of shares or shares with different rights and restrictions, seek help from a lawyer to ensure your company is set up how you want it with their guidance and advice.
3. Who Will the Directors Be?
The Directors are like the “Guiding Mind” of a corporation. They are ultimately responsible for the corporation’s actions and activities. Directors even have some personal liability for the actions of the corporation. They need to ensure that the financial statements are prepared as required and shared with the corporation’s shareholders, as well as schedule the Annual General Meeting (“AGM”) of the Shareholders. They also get to choose who the officers of the corporation are.
A corporation shareholder can also be the corporation’s director (and officer). It is very common for smaller corporations to have a sole shareholder, director and officer.
4. Who Will the Officers Be?
The officers are responsible for the day-to-day activities of the corporation. They are appointed by the directors, controlled by the directors, and report to the directors. The most common titles for officers are President, Secretary, CEO, Treasurer, Vice President, CFO, etc.; one person can hold multiple titles (in other words, you can be both a President and Secretary, etc.).
5. Will you choose a “named” or a “numbered” company?
When you incorporate, you can choose to have a number assigned to your company (ex: 1234567 Canada Corp.) or come up with a name. If you choose your own name, you will first need to take steps to ensure it is available. It can be helpful to choose something unique so your business doesn’t get mixed up with another.
A corporation name should have a distinctive element and a descriptive element. The distinctive element is what makes your name unique. The descriptive element is what describes the main activity of the business. All corporations also need a Legal Ending (Inc., Corp., Incorporated, etc.).
Example: If you chose the name “Greyrock Coffee Roasters Inc.”, Greyrock would be the distinctive element, Coffee Roasters would be the descriptive element, and Inc. is the chosen legal ending.
There are other rules and restrictions around the name you choose. Corporations Canada has a great resource on this—you can find it here.
We hope this helps give you a better understanding of things you’ll need to consider before incorporating. Feel free to contact us if you have any questions or need help navigating the incorporation process.
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