Incorporating a Company

This script discusses incorporating and maintaining a company.

Other ways to form a business, apart from a company

To learn more on whether you want to incorporate a company, check Script 265 on “Starting a Small Business”. Other options are a sole proprietorship and a partnership. Also, before incorporating, you may want to get advice from a lawyer and an accountant. They can help you decide the best way to set up the company’s authorized share structure (explained later) and structure the company for optimal tax planning.

Two types of companies under BC Business Corporations Act

Under BC’s Business Corporations Act, there are public companies and private companies.

A public company has its shares listed and traded on a stock exchange. A private company is typically a small company with very few shareholders (sometimes called a closed corporation) and its shares aren’t offered for sale to the public. This script only applies to private companies in BC.

All private BC companies are incorporated online You can use the BC Registry Services Corporate Online to incorporate a company. And you can pay the fees by credit card.

But consider consulting a lawyer and accountant before incorporating a new BC company online because the standard articles (set of rules that govern the company) and authorized share structure provided online are very simplistic and may not properly meet your needs.

Decide on a name for your company

The name must end in “Limited,” “Ltd.,” “Inc.,” “Incorporated,” “Corp.” or “Corporation,” or the French equivalent to these words. Your new company name needs to be distinctive and have a descriptive element, or you can choose a numbered BC company name. The Corporate Registry has more information on choosing a name. If you decide to carry on business under a trade name, you must display the full legal name of your company on certain documents like contracts and invoices.

Reserve the company name with the Corporate Registry

The easiest way is to reserve online. If the name you want is available, it will be reserved for 56 days.

Decide who will be involved in your company

The shareholders own the company and vote to appoint the directors. The directors control the company and oversee how it is run. They may appoint officers, such as a president or secretary. Typically, the officers handle the daily operations of the company and are overseen by the directors. You can have a one-person company and be the sole shareholder, director and officer.

Shareholders

Consider carefully who the shareholders of your company should be. Even minority shareholders have considerable rights that can greatly affect how a company is run. Shareholder disputes can be destructive. Removing an unhappy shareholder from a company can be very expensive and hard. Sometimes, it is best if investors in a new company are creditors who lend the company money. Or they can be employees or independent consultants, instead of shareholders. It may be best to wait before making people shareholders—until you know they will get along with the existing shareholders in the long term.

Requirements for directors

• A private company must have at least one director.
• A director doesn’t have to live in BC or Canada, but they do have to consent in writing to act as a director.
• A director must provide the Corporate Registry with an address where they can receive documents during standard business hours. If there’s no such office, then the Registry requires the director’s home address.
• A director must be at least 18 years old and cannot have certain criminal convictions, be a bankrupt person (who hasn’t yet been granted formal discharge from bankruptcy) or have been found by a court to be incapable of managing their own affairs.

Registered and records office

A company must have a registered and records office. The registered office is where legal documents can be delivered to the company. The records office is the address where all records for the company are kept. The registered and records offices must be in British Columbia and may be at the same address.

Every company must also have both a mailing address and a delivery address for its registered and records offices. The registered office mailing address is where the company will receive its mail. The registered office delivery address is where the company is given any notices like legal documents. The registered office mailing address may be a post office box, but the registered office delivery address must be a street address accessible to the public during business hours.

Authorized share structure

The number of shares your company is authorized to issue to its shareholders is called the authorized share structure. This number can be limited or unlimited. You have to decide the type and number.

There are two main kinds of shares: par value shares and shares without par value. Par value shares have a minimum price they can be sold for. Shares without par value don’t have a minimum price. You can also have different classes of shares with different attributes and rights, such as common shares and preferred shares, voting rights, the right to receive dividends, plus different series of shares within a class of shares. The specifics can be complicated, so get advice from a lawyer or accountant.

Required incorporation documents that must be prepared

• an Incorporation Agreement
• the Incorporation Application
• the Articles
• the Notice of Articles

Incorporation Agreement—this is an agreement between the incorporator (or incorporators) and the company. It describes the number, kind and class of shares each incorporator agrees to take once the company is incorporated. The incorporator must agree to take at least one share of the company and therefore become the company’s first shareholder. The Incorporation Agreement must be signed by the incorporator before submitting the Incorporation Application to the Corporate Registry. You don’t submit the Incorporation Agreement itself to the Corporate Registry, but a signed original should be placed in the company’s records book.

Incorporation Application—this is available from Corporate Online. The person who completes it is called the Completing Party. The Completing Party must ensure that the Incorporation Agreement and Articles are properly prepared and signed by the Incorporator.

Articles—these are the rules and regulations for your company. You can use the sample set in the Business Corporations Act or have them specially drafted to suit your needs. The Incorporator must sign the Articles. You don’t need to submit them to the Corporate Registry, but you should file a copy in the company’s records book.

Notice of Articles—this document has the following information: • the company’s name • the authorized share structure • whether there are special rights and restrictions attached to the shares • the addresses of the registered and records offices • the names and residential or business addresses of the directors

How do you submit the incorporation documents to the Corporate Registry? You must e-file or electronically submit your Incorporation Application and attached Notice of Articles to the Corporate Registry, along with the prescribed fee, through Corporate Online. Your company will then be incorporated almost instantly. For an extra fee, you can also specify a date and time up to 10 days later for the incorporation of the company.

When you e-file, you’ll have to set up a password (and specify a hint to help you remember the password) for your company so you can submit forms in the future online. After you e-file, the Corporate Registry will issue a Certificate of Incorporation and send you certified or true copies of the Incorporation Application and Notice of Articles.

Organizing your company This includes preparing the company’s records book, preparing director and shareholder resolutions, issuing shares, and preparing a directors’ register plus a “central securities register” or share register. You may wish to talk to a lawyer about this. Keeping a well-organized corporate record book and set of financial statements will help when you sell your company and if the Canada Revenue Agency (CRA) decides to audit your company.

Maintaining your company To keep your company alive, it must file an annual report with the Corporate Registry each year within two months of its anniversary date of incorporation. Failure to file an annual report for two consecutive years can result in the company being dissolved. Also, if the company changes its registered or records office, or if the directors resign or change their address, the company must e-file other forms with the Corporate Registry. There are fees for most of these filings. As well, each year, every BC company must choose to either appoint an auditor or waive the appointing of an auditor.

Incorporating a federal company You can incorporate a federal company under the Canada Business Corporations Act. A federally incorporated company has the right to carry on business anywhere in the country and will have its name protected across Canada. But a federal incorporation usually takes more time, and the corporation is often more expensive to operate than a BC company.

BC companies can carry on business in other provinces A private BC company can do this if it registers itself extra-provincially in those provinces. But unlike a federally incorporated company, an extra-provincially registered BC company may have its application to register its name in another province refused by the Registrar of that other province.

Protecting your company’s brand Registration and use of a trademark is the best protection for your company’s name and brand. Check scripts 231 and 264 on trademark law.

More information • Check the Corporate Registry website. • Small Business BC has excellent information on incorporating a company and free guides. Call 604.775.5525 in Vancouver or 1.800.667.2272 elsewhere in BC. • Check your local library, bookstore and Chamber of Commerce for other books and resources on incorporating a company.

This script discusses incorporating and maintaining a company.

There are different ways to form a business, other than a company

To learn more on whether you want to incorporate a company, refer to Script 265 on “Starting a Small Business”. Also, before incorporating, you may want to seek advice from a lawyer and an accountant. They can help you decide the best way to set up the company’s “authorized share structure” (explained later) and structure the company for optimal tax planning.

There are basically two types of companies

Under BC’s Business Corporations Act, these are:

• a public company
• a private company

A public company has its shares listed and traded on a stock exchange. A private company is typically a small company with very few shareholders, and its shares aren’t offered for sale to the public. This script only applies to private BC companies.

All private BC companies are incorporated online

Use the Corporate Online services found at www.corporateonline.gov.bc.ca. You can use a credit card to pay for the fees.

Decide on a name for your company

The name must end in “Limited,” “Ltd.,” “Inc.,” “Incorporated,” “Corp.” or “Corporation,” or the French equivalent to these words. Your new company name needs to be distinctive and have a descriptive element, or you can choose a numbered BC company name. The Corporate Registry has more information on choosing a name – see www.bcregistryservices.gov.bc.ca and click on the “B.C. Companies” link. Note that if you decide to carry on business under a trade name, you have to display the full legal name of your company on certain documents like contracts and invoices.

You must then reserve the name with the Corporate Registry

The easiest way is to reserve online at www.corporateonline.gov.bc.ca. If the name you want to use is available, it will be reserved for 56 days.

Decide who is going to be involved in your company

The shareholders are the owners of the company. The directors have the responsibility and control of the company. They may appoint officers, such as a president or secretary. Typically, the officers handle the day-to-day operations of the company and are overseen by the directors. You can have a one-person company and be the sole shareholder, director and officer.

Are there any requirements for directors?

Yes. Some of the requirements are:

• A private company must have at least one director.
• A director doesn’t have to live in BC or Canada, but they do have to consent in writing to act as a director.
• A director must provide the Corporate Registry with an address where they can receive documents during standard business hours. If there’s no such office, then the Registry requires the director’s home address.
• A director must be at least 18 years old and cannot have certain criminal convictions, be a bankrupt person (who hasn’t yet been granted formal discharge from bankruptcy) or have been found by a court to be incapable of managing own affairs.

The company must have a registered and records office

The registered office for your company is where legal documents can be delivered. The records office is the address where all records for the company are kept. The registered and records offices must be in British Columbia and may be at the same address.

Every company must also have both a mailing address and a delivery address for its registered and records offices. The registered office mailing address is where the company will receive its mail. The registered office delivery address is where the company is given any notices like legal documents. The registered office mailing address may be a post office box, but the registered office delivery address must be a street address that’s accessible to the public during business hours.

You need to decide on an “authorized share structure”

The number of shares your company is authorized to issue to its shareholders is called the authorized share structure. This can be a limited number of shares or an unlimited number.

There are two main kinds of shares: par value shares and shares without par value. Par value shares have a minimum price at which they must be sold. Shares without par value don’t have a minimum price. You can also have different classes of shares with different attributes and rights, such as common shares and preferred shares, voting rights, the right to receive dividends, as well as different series of shares within a class of shares. The specifics can be complicated, so professional guidance from your lawyer or accountant is recommended.

To incorporate a company, certain incorporation documents must be prepared

These include:

• an Incorporation Agreement
• the Incorporation Application
• the Articles
• your Notice of Articles

What is the Incorporation Agreement?

This is an agreement between the incorporator (or incorporators) and the company. It describes the number, kind and class of shares each incorporator agrees to take once the company is incorporated. The incorporator must agree to take at least one share of the company and therefore become the company’s first shareholder. The Incorporation Agreement must be signed by the incorporator before submitting the Incorporation Application to the Corporate Registry. You don’t submit the Incorporation Agreement itself to the Corporate Registry, but a signed original should be placed in the company’s records book.

The Incorporation Application is a document available through Corporate Online

The person who completes the Incorporation Application is called the Completing Party. The Completing Party must ensure that the Incorporation Agreement and Articles are properly prepared and signed by the Incorporator.

The Articles are the rules and regulations for the conduct of your company

You can use the sample set in the Business Corporations Act or have them specially drafted to suit your needs. The Incorporator must sign the Articles of the company. You don’t need to submit the Articles to the Corporate Registry, but you should file a copy in the company’s records book.

What is the Notice of Articles?

The Notice of Articles is a document that contains the following information:

• the company’s name
• the authorized share structure
• whether or not there are special rights and restrictions attached to the shares
• the addresses of the registered and records offices
• the names and residential or business addresses of the directors

How do you submit the incorporation documents to the Corporate Registry?

You must “e-file” or electronically submit your Incorporation Application and attached Notice of Articles to the Corporate Registry, along with the prescribed fee, through Corporate Online. Your company will then be incorporated almost instantly. If you prefer, for an additional fee, you can specify a date and time up to ten days in future for the incorporation of the company.

When you e-file, you’ll have to set up a password (and specify a hint to help you remember the password) for your company so you can submit forms in the future using www.corporateonline.gov.bc.ca. After you e-file, the Corporate Registry will issue a Certificate of Incorporation and send you “certified” or true copies of the Incorporation Application and Notice of Articles.

After incorporating your company, it must be organized

This includes preparing the company’s records book, preparing director and shareholder resolutions, issuing shares, and preparing a directors’ register plus a “central securities register” or share register. You may wish to talk to a lawyer about this. Maintaining a well-organized corporate record book and set of financial statements will help when you sell your company and if the Canada Revenue Agency (CRA) decides to audit your company.

How do you maintain your company?

Certain steps must be taken to keep your company alive. Your company must file an annual report with the Corporate Registry each year within two months of its anniversary date of incorporation. Failure to file an annual report for two consecutive years can result in the company being dissolved. Also, if the company changes its registered or records office, or if the directors resign or change their address, the company must e-file other forms with the Corporate Registry. There are fees associated with most of these filings. As well, each year, every BC company must choose to either appoint an auditor or waive the appointing of an auditor.

What about incorporating a federal company?

It’s possible to incorporate a federal company under the Canada Business Corporations Act. A federally incorporated company has the right to carry on business anywhere in the country and will have its name protected across Canada. But a federal incorporation usually takes more time, and the corporation is often more expensive to operate than a BC company.

Alternatively, a BC company can carry on business in other provinces

Your private BC company can do this if it takes steps to register itself extra-provincially in those provinces. But unlike a federally incorporated company, there’s a risk that an extra-provincially registered BC company may have its application to register its name in another province refused by the Registrar of that other province.

How can you protect your company’s brand?

Registration and use of a trademark is the best protection for your company’s name and brand. Refer to Scripts 231 and 264 to learn more about trademark law.

Where can you get help or find more information?

• You can obtain a copy of BC’s Business Corporations Act from any bookstore that sells government publications or download a free copy from www.bclaws.ca.
• Visit the Corporate Registry’s website at www.bcregistryservices.gov.bc.ca/bcreg/corppg/index.page.
• Small Business BC has excellent information on incorporating a company and free guides. Call 604.775.5525 in Vancouver or 1.800.667.2272 elsewhere in the province, or visit www.smallbusinessbc.ca.
• You can also consult your local library, bookstore and Chamber of Commerce for other books and resources on incorporating a company.

[updated October 2014]

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