How to Incorporate a Business in Canada

Incorporation is a significant decision for any entrepreneur, but it doesn't have to be overwhelming. With the exciting partnership between Law Depot and Vault, businesses can effectively make their incorporation costs nearly free. Vault offers a $100 rebate for those who incorporate with Law Depot, significantly reducing the financial burden.

Why Incorporate?

Limited Liability: One of the key reasons to incorporate is limited liability. As a sole proprietor or partner, your personal assets are at risk if the business incurs debt. Incorporating separates personal and business liabilities, protecting your personal property.

However, directors may still be personally liable for certain debts, such as unpaid wages or unremitted GST/HST.

Tax Advantages: Corporations are taxed at lower rates than individuals, especially Canadian Controlled Private Corporations (CCPCs). In Ontario, CCPCs pay a tax rate of 13.5% on the first $500,000 of income. By keeping money in the company, you can invest in growth and minimize personal tax burdens.

You also have flexibility in how you pay yourself, whether through salary, dividends, or a mix of both, to optimize tax efficiency.

Benefits of Incorporating

Incorporating your business offers several advantages:

• Raising Capital: Investors are more likely to invest in an incorporated business, as it allows for the issuance of shares.
• Professional Image: Incorporation signals professionalism, as clients receive invoices from a legally registered business.
• Transferable Shares: Incorporation allows for the easy transfer of ownership via shares.
• Continuous Lifespan: A corporation can exist indefinitely, beyond the lifespan of its founders.

Steps to Incorporate Your Business

Choosing a Business Name: Your business name must have three elements: a distinctive component, a descriptive component, and a legal ending (Inc., Ltd., Corp.). Alternatively, you can incorporate as a numbered company.

If you use a service like Law Depot, they’ll handle the NUANS search for you.

Choosing Incorporation Jurisdiction: You can incorporate federally or provincially. Both allow you to operate across Canada, but federal incorporation provides enhanced name protection nationwide.

Filing Articles of Incorporation: After selecting a name and jurisdiction, you must file Articles of Incorporation. This includes choosing a share structure and appointing directors. Law Depot streamlines this process by handling all government filings for you.

Where to Incorporate

Incorporation fees vary by jurisdiction. Here are your options:

• Federal
• British Columbia
• Alberta
• Ontario
• Saskatchewan

Going directly to the government is an option, but legal fees may still apply to ensure compliance.

How to eliminate incorporation fees

In an exciting development aimed at making incorporation more affordable, Law Depot has partnered with Vault. Businesses that incorporate with Law Depot can recoup their incorporation costs of $100 by signing up with Vault for business banking. For more details on this promotion, visit Vault's partnership page.

Conclusion

Incorporating your business provides benefits like limited liability and tax advantages. While it requires an upfront investment and ongoing compliance, the long-term gains often outweigh the initial costs—especially with Vault's rebate making incorporation nearly cost-free. If you’re ready to take the leap, services like Law Depot make the process easier by handling legal documents and filings on your behalf.

If you have questions or want to learn more, reach out to Vault’s support team at support@tryvault.com