Incorporation Lawyers Toronto & GTA

Incorporation

A corporation is a legal entity that is separate and distinct from its owners, known as shareholders. It is created through the process of incorporation under the laws of a particular jurisdiction. Corporations have many of the same rights and responsibilities as individuals, including the ability to enter into contracts, own assets, sue or be sued, and pay taxes. One of the key features of a corporation is limited liability, which means that the shareholders are not personally liable for the debts and obligations of the corporation. This makes corporations an attractive choice for entrepreneurs and business owners looking to protect their personal assets while conducting business activities.

Is Incorporation Right for You?

Not always. With our combined tax and corporate experience, we recommend the most suitable business structure that minimizes your tax to the CRA.

If incorporation is right for you, our business incorporation lawyers will structure your corporation to optimize corporate tax planning opportunities. This may include several corporations of operating and holding companies. Or it may include a family trust holding the shares of the operating company. Importantly however, we set up your corporations to take advantage of income splitting and dividend sprinkling between spouses to the extent permissible. Despite what you’ve heard, these tax planning tools are still available post January 2018. For more information on income splitting, read our article here.

If we determine incorporation is not necessary nor advantageous for tax reasons, we will establish a partnership or sole proprietorship as your business structure.

Advantages of Corporation

Limited liability of the corporation’s shareholders, directors and officers
- Lower income tax rates on revenue earned inside a corporation
- Opportunities for tax benefits such as the Lifetime Capital Gains Exemption, or income splitting during ownership
- An operating company/holding company structure can introduce further benefits such as creditor proofing and income tax deferral using the intercorporate dividend mechanism + secured loanback

Disadvantages of a Corporation

Increased administrative burden in maintaining a corporation year over year (annual resolutions, annual corporate returns and annual tax returns)
Higher costs to establish the corporation (around $1500 initially and then $500/year)

FAQs:

What is the difference between a corporation and a sole proprietorship?

A sole proprietorship is the default legal status of an individual carrying on business without having taken steps to operate through a separate legal entity; the proprietor and the business are the same person in law, and the proprietor carries unlimited personal liability and pays taxes at personal marginal rates. A corporation is a separate legal entity registered under the OBCA or CBCA, with its own legal personality, its own tax filings, and its own liability perimeter; shareholders are insulated from the corporation's debts and obligations, and the corporation pays tax at corporate rates, with substantial planning room around dividends, retained earnings, and family-trust ownership.

How long does it take to incorporate a business in Ontario?

Most incorporations are completed within a few business days of the structural-choice consultation, subject to the NUANS name search returning a clear name and the client providing the necessary information on directors, officers, the registered office, and shareholders. Numbered corporations can be incorporated even faster, where speed is more important than the brand on the public record.

Should I have an operating company and a holding company?

Often, but not always. The opco-holdco structure delivers intercorporate dividend deferral, creditor protection on retained earnings paid up to the holdco, and the architecture for a future estate freeze and rollover work. The cost is one additional corporation and a slightly heavier compliance footprint each year. The structure is generally worth the cost where the corporation is profitable, where the founder intends to retain earnings, and where succession or sale planning is on the horizon. It is generally not worth the cost in the very early years of a business that is reinvesting all its income.

Can I incorporate as the only shareholder?

Yes. A corporation can be incorporated with a single shareholder, who can also be the sole director and sole officer. The structure is a common starting point and remains flexible; additional shareholders, including a spouse, an adult child, a family trust, or a holding company, can be added later through share issuances or section 85 / section 86 reorganizations as the corporation's circumstances change.

Do I need a lawyer to incorporate, or can I use an online service?

An online service can register a corporation with a single class of common shares held by the registrant, and where that is the right structure for the business, it is a serviceable starting point. The reason most owner-managed corporations are better served by lawyer-led incorporation is the structural-choice consultation that should precede the filing, the share-class architecture that should follow it, and the integration with the tax and succession planning that the corporation will need over time. An online incorporation that has to be reorganized later under a Section 85 rollover or articles of amendment generally costs materially more in aggregate than a lawyer-led incorporation that was set up correctly from the start.

Should I incorporate provincially (OBCA) or federally (CBCA)?

Both are common in Ontario. OBCA incorporation registers the corporation only in Ontario and is generally sufficient for businesses operating in one province. CBCA incorporation is federal, gives stronger name protection across Canada, and is preferred for businesses operating in multiple provinces. The choice also affects director-residency rules, filing fees, and ongoing compliance.

How much does it cost to incorporate a business in Ontario?

Government filing fees are $300 for an OBCA corporation and $200 for a CBCA corporation when filed online. A NUANS name reservation adds a small additional fee for a non-numbered name. Legal fees vary by complexity; a single-corporation setup is normally fixed-fee, while an opco-holdco pair or trust structure is priced separately.

What is a NUANS name search, and do I need one?

A NUANS report is a name search against existing Canadian corporate and trademark records, required before incorporating under any non-numbered name. It confirms that the proposed name is not already in use or confusingly similar to an existing one. Numbered corporations do not require a NUANS.

What share classes should I include in my articles of incorporation?

At a minimum, voting common shares for the founder. A properly structured corporation will also typically contemplate non-voting common shares, fixed-value preferred shares for a future estate freeze, and redeemable and retractable preferred classes for rollovers. Designing the architecture at incorporation avoids the cost of an articles amendment later.

What are my ongoing compliance obligations after incorporating?

Every Ontario or federal corporation must file an annual return, maintain an up-to-date minute book, keep a registered office, and track director, officer, and shareholder changes. The CBCA also requires a register of individuals with significant control. Missed filings can lead to dissolution and, in some circumstances, personal liability for directors.

Incorporation

Is Incorporation Right for You?

Advantages of Corporation

Disadvantages of a Corporation

FAQs:

Insights

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Incorporation

Is Incorporation Right for You?

Advantages of Corporation

Disadvantages of a Corporation

FAQs:

Insights

How Can We Help?

Contact Us for a No-Charge Consultation

Contact Us