It’s really exciting to incorporate a company. It can feel like you’re taking a significant step in pursuing your dreams, whatever they might be.
You’re creating the legal vehicle to incubate your hopes and dreams. It’s a milestone that you can proudly share with your friends and family. In some ways, it’s a public statement of your intention to do something different and special.
But when the initial excitement fades away, you’re going to be left with some ongoing obligations that will consume your time and money. If your journey is meaningful and profitable, then the time and money will be trivial compared to your larger goals, but knowing what to expect is still good.
I call this the “User Manual Rule”. It’s a rule I’ve developed for myself when getting into something new or buying something new. The rule goes something like this: If you’re interested in doing something or buying something you’ve never bought before, see if you can get a copy of the User Manual and understand what you’re getting yourself into.
Often the product or service you’re interested in seems like a perfect fit when it’s being marketed to you. Then, once you actually use it, you discover that it has limitations and functionalities that are not at all what you expected. If you can get a sneak peek of what to expect with a User Manual, you can get a better idea of whether or not that product or service is a good fit and worthy of your time and money.
You can use this article as your sneak peek into what costs to expect after you have incorporated your company (If you’re interested in learning more about the incorporation process itself, check out some of our other articles or contact us).
Office Address Fees
Every corporation needs a physical address in the province where its registered office is.
If you already have an office, shop, or other commercial space for your business, you can use that address (presumably, it would not cost you anything extra). You could also use a residential address; however, your residential address will be part of the public record associated with your corporation—some people are okay with that, and others are not.
If you do not have an existing business address and don’t want to use a residential address, then there are companies that will rent out a business address to you on a monthly basis. The cost is usually around $15 to $75/month.
Bank Fees
Most people go straight to the bank after they have incorporated a company. Everyone is eager to open a bank account for their new corporation.
Opening a bank account is typically free… but monthly costs must be considered. And if you want cheques, there are additional fees to order them (usually ~$75).
There is a distinction between commercial banking and small business banking at the big banks in Canada. This article refers to small business banking products (and if you’re reading this article, that’s probably the category you’d fall into). The big banks in Canada have various small business bank account options. For the accounts on the lower end, you can pay a smaller monthly fee (e.g. $5-$10 per month) but then be required to pay additional fees on a per-transaction basis. These fees seem minimal but add up over time (especially if you have an inactive corporation or a start-up that’s slower than expected to get off the ground (you are not alone!)).
Business credit cards can also be a source of fees. There are some $0 business credit cards, but if you want a card that offers some basic benefits (such as insurance when renting a business vehicle), you will need to pay an annual fee. Ratehub is a useful Canadian site for comparing the costs and benefits of bank accounts and credit cards. Most basic business credit cards (beyond the $0 options) are $100 to $120 annually.
Overall, you should plan on spending $20-$30/month for basic banking and credit card fees.
Bookkeeping and Accounting Fees
Accounting fees for preparing and submitting corporate tax returns are much higher than for personal tax returns. In the GTA, the base cost for corporate tax returns is roughly $2,000 to $2,500 per year (for the most basic of corporations) and can be much higher.
In addition to accounting fees, there can also be bookkeeping fees (if you don’t want to do bookkeeping yourself—and it’s the type of thing that’s easy to think you can do yourself …and hard to actually do it well). Bookkeeping fees at their most basic are roughly $200 per month and, again, can be much higher (with increasing complexity and numbers of transactions).
Annual Maintenance fees
Every year your corporation needs to (1) file a corporate information return and (2) carry out internal Annual Maintenance (including dividend resolutions if you’re paying out dividends). This is referred to as “Annual Maintenance”. You can read more about it in our article, All About Annual Maintenance.
Lawyers in the GTA typically charge somewhere in the range of $400 to $600 per year for Annual Maintenance. And on top of that, there are government filing fees, which generally range from roughly $12 to $60 per year.
You are also required to file notices of change with the corporate registry every time there is a change related to the corporation and to update the corporation’s internal records. Minor changes typically cost $200 to $400 per change in combined filing and legal fees.
With the Tobuso platform, you can take care of Annual Maintenance and corporate changes as part of your digital minute book subscription for less than half of that cost and with many more benefits. You can easily sign up for free to try it out.
Legal fees
Legal fees will vary from year to year for your corporation. For certain years you may spend $0 on legal fees, and for others, much more.
Typically after incorporation, there are additional steps that need to be taken that might involve a lawyer, such as:
- putting in place shareholders’ agreements,
- putting in place shareholder loan agreements,
- preparing template agreements to use with customers.
- preparing template agreements to use with employees and independent contractors,
- applying for trademark protection,
- raising capital from outside investors, and
- licensing intellectual property to the new company.
There can, of course, be many other matters where you need assistance from a lawyer… depending on your business and situation. However, legal expenses will typically grow as your business revenues (or potential revenues) grow.
Insurance
Insurance will also vary depending on the specifics of your corporation. You might have $0 in insurance costs until your corporation is further along in its evolution.
Keep in mind that there are various types of insurance that you might consider putting in place, such as commercial general liability coverage (“CGL”), director and officer liability coverage (“D&O”), and cybersecurity coverage.
Some insurance is mandatory in Canada. For example, the Workplace Safety and Insurance Board (“WSIB”) in Ontario and Worker’s Compensation Board (“WCB”) in British Columbia require corporations in those provinces that meet certain criteria to register and pay premiums under those programs.
Time to Get Started!
We hope this summary helps you understand what it costs to maintain a corporation after it has been incorporated. Feel free to contact us if you have any questions or want to learn more about the platform for your corporate record keeping. Best of luck with your business endeavours!
