Incorporating Your Purpose-Driven Business: Canadian Edition

As Toronto’s first and only Fundraising Communications Studio, we’ve worked with many clients to navigate the incorporation process. With all the policies and procedures, it seems like the incorporation process is a daunting task. But relax, we’re here to help! If you’re wondering if your business is ready for incorporation, read on to find out.


What Is Incorporation?

An incorporated business (also known as a corporation) is a considered a business that is its own legal entity and that is separate from the owners, partners and stakeholders. Deciding to incorporate your business is not a legal obligation and you can decide to undertake this application at any point in your business venture.


Should You Incorporate Your Business?

At some point in your business, the question to incorporate your business may arise. If you decide to incorporate, there are benefits such as legally separating your personal and business obligations. This means that your personal assets are separate from any corporate debt or bankruptcy, aside from the original amount you invested.

Other benefits include:

Continuous life: Your business will remain in business even if the owner or any business partners leave the business.

Tax advantages: Depending on the size of the company, incorporated businesses will enjoy a lower tax rate, reduced taxable income and tax savings.

Increased credibility: Companies with “Ltd.” or “Inc.” adds credibility because it shows stability, maturity and trustworthiness. Whether that is true or not, depends on the specific company. But there is no doubt that this detail offers legitimacy and worthiness to a business at first glance at least.

Advantages in raising money: Banks find lending to incorporate businesses more attractive as they are normally considered lower-risk borrowers. Venture capitalists and investors also tend to favour incorporated businesses for the same reason plus the ease in selling shares and equity.

Of course, there are disadvantages to incorporating your business including the overwhelming pile of paperwork, expensive fees and the fact that corporate losses cannot be personally claimed.


How to Incorporate In Canada?

1.     Name Your Business

Deciding on a business name is a long-term commitment so make sure that it is a name you like and that is available.

2.     Get a Business Number (BN) – or a NEQ (for Quebec businesses)

A business number is a unique, 9-digit number that is associated with your business to federal and provincial governments. In Quebec, the number is known as NEQ (Quebec Enterprise Number). In other Canadian provinces and territories, the number is called a Business Number (BN).

3.     Decide to Incorporate Federally or Provincially

Businesses can choose to incorporate either federally or provincially. By incorporating federally, businesses may operate under the same name across all provinces and territories in Canada. However, this is more expensive to apply and involves a longer setup process and more paperwork. 

4.     Register for a GST/HST Account

This applies to businesses that generate $30,000 or more in total revenue per year. However, businesses with under $30,000 in revenue may opt to register for a GST/HST account because your company may be eligible for a GST/HST refund by the government.


When Is The Right Time to Incorporate?

There isn’t a definitive time to incorporate your business but it is prudent to ask yourself this question during the launch of your business. Even if you decide to postpone the application, you should keep revisiting this question as your company matures. Your answer may change over time based on your company’s legal and tax situation. Not all businesses need to be incorporated and not all will be eligible for tax benefits.

If you’re unsure about whether or not you should incorporate your business, take the time to conduct research in your jurisdiction or speak with a professional.

Have any questions? We’re here to help! Contact us.

Shirley Lui