What is the purpose of a corporation in Canada?

A corporation provides a separate legal structure that protects owners through limited liability while enabling long-term growth and investment.

Is incorporating a business in Canada worth it?

Yes. Incorporation offers tax advantages, limited liability, perpetual existence, and share transfer flexibility.

What is the difference between a business and a corporation?

A business is any commercial activity, while a corporation is a distinct legal entity separate from its owners.

Do I need a lawyer to incorporate in Canada?

Not legally, but a corporate lawyer ensures your share structure, agreements, and filings are completed correctly—preventing costly mistakes.

Can a corporation continue if the owner dies or leaves?

Yes. Corporations have perpetual existence.

What do corporate lawyers do?

The days of a corporate lawyer are filled with transactions related to corporate law’s several major areas of practice: mergers and acquisitions, real estate, corporate finance, and insolvency and banking. A typical day includes incorporating companies; acting on mergers and acquisitions; restructuring of corporate entities; drafting documents for shareholder agreements; conducting due diligence by researching past company filings and disclosure documents; and drafting documents, such as director’s resolutions, material change reports, articles of association, or securities memorandums.

What are the benefits of incorporation in Canada?

The benefits of incorporation are limited liability, separate legal entity, perpetual existence, and free transferability.

What does limited liability mean?

In the event a corporation becomes insolvent, the owner and shareholders are not liable for the debts or other obligations incurred by the corporation. Yes, the shareholders will lose their investment, but they will not be responsible for its debt.

What does separate legal entity mean?

Separate legal entity refers to a corporation’s operating as distinct from its shareholders, directors, and officers. A corporation (like a person) can own property, enter into a contract, sue and be sued, and be convicted of a criminal offense (corporations pay fines in lieu of imprisonment.) A corporation exists as its own entity, regardless of what happens to the individuals involved in the business.

What does perpetual existence mean?

Perpetual existence refers to a corporation’s continued existence until it is liquidated, dissolved, or acquired by another entity. When a business is incorporated, the owners, officers, and shareholders (the organizers) can choose to give it an end date when the mission of the corporation has been fulfilled. More commonly, a corporation acts in perpetual existence; that is it will continue to exist, until the organizers decide to end it. Even if the executive team and employees were to quit, the business corporation as an entity would continue to exist, and new employees could take their place.

What does free transferability mean?

Free transferability refers to the shareholders’ ability to sell shares without the consent of the directors, officers, or other shareholders, unless otherwise restricted in the corporate constitution. That being said, shareholders of privately held corporations often will want to prevent unrestricted transfer of shares and thus may provide transfer restrictions in the articles of incorporation or enter into shareholders’ agreements, further limiting transferability. There are separate rules and restrictions governing the transfer of shares in a private versus a public corporation.

Corporate Law in Canada: What It Is & Why Businesses Incorporate

The Basics of Corporate Law in Canada (Complete Guide)

What Is Corporate Law in Canada?

Corporate law in Canada is the legal framework that governs how corporations are formed, operated, managed, restructured, and dissolved. It defines the rights and obligations of shareholders, directors, officers, and the corporation itself. Corporate lawyers play a critical role in helping businesses comply with these laws while protecting their legal and financial interests.

Many business owners often ask:

What do corporate lawyers actually do?
Why should a business incorporate?
Is a company the same as a corporation?
How does corporate law protect business owners?

This guide breaks down the fundamentals of corporate law, including what corporations are, the benefits of incorporation, and how corporate lawyers support businesses throughout their lifecycle.

What Does a Corporate Lawyer Do?

A typical day for a corporate lawyer is filled with transactions, business advisory services, and legal documentation.

Common corporate law services include:

Incorporating companies
Mergers and acquisitions
Corporate restructuring
Drafting shareholder agreements
Corporate finance and securities filings
Real estate transactions
Conducting due diligence
Drafting legal documents such as:
- Director resolutions
- Articles of incorporation
- Material change reports
- Securities memorandums

No two transactions are the same. Corporate lawyers work with clients of all sizes, including:

Startup businesses
Small and mid-sized companies
Private corporations
Investment firms
Government agencies
Multi-national corporations

Corporation vs. Business vs. Company – What’s the Difference?

Understanding these terms is essential for business owners:

What is a Corporation?

A corporation is a legally separate entity that exists independently from its owners.

This means a corporation can enter into contracts, own property, borrow or loan money, sue and be sued, pay taxes and continue existing even if ownership changes.

A business or company, on the other hand, is not always a separate legal entity. Sole proprietorships and partnerships do not provide the same legal protections as corporations.

Why Does This Matter?

Because a corporation’s separate legal status grants owners and shareholders one of the most valuable advantages in business: limited liability.

Benefits of Incorporation in Canada

Businesses incorporate in Canada for four major legal and financial advantages:

1. Limited Liability

If the corporation becomes insolvent, shareholders can lose their investment but they are not personally responsible for the company’s debt.

This legal separation protects personal assets such as homes, vehicles, and personal bank accounts.

2. Separate Legal Entity

A corporation is recognized as its own “person” under Canadian law.
This means:

A corporation can:

Own property
Sue and be sued
Hire employees
Enter into contracts
Be charged criminally (fines instead of imprisonment)

The business continues regardless of what happens to owners or directors.

3. Perpetual Existence

Corporations have a continuous existence until:

Dissolved
Liquidated
Sold or acquired

This creates:

Long-term business stability
Investor confidence
Easier sale or transfer
Business continuity even if the owners leave

Perpetual existence also allows management to plan for long-term growth, innovation, and market expansion.

4. Free Transferability of Shares

Shares in a corporation can typically be bought or sold without requiring unanimous approval, unless restricted by:

Shareholders’ agreements
Articles of incorporation

This flexibility increases:

Investment liquidity
Ease of ownership changes
Access to new investors

Incorporation in Canada: Provincial vs. Federal

Corporations in Canada may be incorporated:

Provincially

For example:

Ontario corporations are governed by the Business Corporations Act (Ontario).

Federally

Governed by the:

Canada Business Corporations Act

Both forms offer limited liability and separate legal status. The right choice depends on:

Whether the business will operate in multiple provinces
Desired business name protection
Reporting requirements

Private corporations often place restrictions on share transfers, because shareholders are usually also:

Directors
Officers
Employees

Common restrictions include:

Who can buy or sell shares
Limits on the number of shares transferable
Requiring the approval of existing shareholders
Mandatory shareholder resolutions

These rules ensure that owners have control over who joins the company.

Public company shares are traded freely on stock exchanges, including:

Toronto Stock Exchange
Canadian Securities Exchange
TSX Venture Exchange
Montreal Exchange

The goal is liquidity—investors can buy and sell freely.

Why Work With a Corporate Lawyer?

A corporate lawyer helps businesses:

Select the right structure
Minimize legal and financial risks
Maintain corporate records
Prepare agreements
Ensure regulatory compliance
Navigate mergers, acquisitions, or major transactionsQWQ

From incorporation to growth to exit, corporate counsel helps ensure that your corporation is structured for efficiency, protection, and long-term success.

Get Professional Corporate Legal Support

You work hard to build your business. We work hard to protect it.

Kalfa Law Firm provides comprehensive corporate legal services for businesses in:

Toronto
Mississauga
Brampton
Markham
Vaughan
Oakville
Greater Toronto Area (GTA)
Across Ontario and Canada

Book a free consultation today to discuss your incorporation, restructuring, or business legal needs.

FAQs

-Shira Kalfa, BA, JD, Partner and Founder

Shira Kalfa is the founding partner of Kalfa Law Firm. Shira’s practice is focused in corporate-commercial and tax law including corporate reorganizations, corporate restructuring, mergers and acquisitions, commercial financing, secured lending and transactional law. Shira graduated from York University achieving the highest academic accolade of Summa Cum Laude in 2012. She graduated from Western Law in 2015, with a specialization in business law. Shira is licensed to practice by the Law Society of Ontario. She is also a member of the Ontario Bar Association, the Canadian Tax Foundation, Women’s Law Association of Ontario, and the Toronto Jewish Law Society.

The above provides information of a general nature only. This does not constitute legal advice. All transactions or circumstances vary, and specified legal advice is required to meet your particular needs. If you have a legal question you should consult with a lawyer.