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As you get ready to incorporate your company, there are some important questions that you should address.

First, if you will be operating your business in Ontario, you can either incorporate an Ontario corporation or you can register a federal corporation and obtain an Ontario extra-provincial registration. Click here to read about the difference between Ontario and Federal corporations.

Next, you will have to decide whether you would like to incorporate by yourself (through either the Ontario Business Registry for Ontario corporations, or Corporations Canada for federal corporations), use an online service that offers incorporation kits (a.k.a. document filing services), or hire a law firm to handle your incorporation. This article will give you an overview of each and discuss the advantages and drawbacks of each.

HOW TO/STEPS TO INCORPORATE

As far as legal matters go, the process to incorporate yourself does not have to be too complex. However, incorporating a corporation is a legal procedure that requires you to understand the NUANS name search process, what’s included in the articles of incorporation, as well as the back-end paperwork that is required to organize your corporation. Below is summary of the general steps that are involved in incorporating a corporation.

• Conducting a NUANS (name) search. If you would like your new corporation to have a name (rather than a numbered name), you are required to obtain a NUANS search report before you begin the incorporation process to ensure that your business name is not already in use, or too similar to another company’s name. The NUANS is the statutory prescribed computerized name search report which lists business names, corporation names, and trademarks that have already been registered and that may be similar to your proposed name. The NUANS system isn’t available to the public, so if you are incorporating an Ontario company,  you will need to pay a third-party provider to conduct your NUANS search. Note that the NUANS system will simply provide you with a list of similar or identical names. The government system will not assist you with legal advice to ensure that your name is compliant with the applicable law and analyzing the NUANS search for your benefit – it will not stop you from registering the name when you incorporate. If your company name is too similar to another business’s name, this can have implications in the future, as you may find yourself being challenged or being sued by another corporation.  If you are incorporating a federal company, the good news is that the process through which you incorporate your company through Corporations Canada will include a NUANS search. Because your application will be assessed by someone from Corporations Canada who will ultimately accept or reject your application, it is less likely that you will run into problems with litigation over your business name in the future.

• Preparing and filing Articles of Incorporation. You can obtain your Certificate and Articles of Incorporation through the government websites: Ontario Business Registry for Ontario corporations, or Corporations Canada for federal corporations. The website will take you through a series of questions and you will need to provide information about your corporation, such as corporation name, registered address, directors’ information, etc.

You can find out what’s included in the Articles of Incorporation by clicking here:  https://blog.ordowerlaw.com/blog/what-is-included-in-the-articles-of-incorporation.

You will receive your certificate and articles of incorporation through the email you provide to the ministry. If you are incorporating in Ontario, your Certificate and Articles of Incorporation will generally be filed instantaneously. If you are incorporating federally, it can take anywhere from a few hours to a few business days to receive your Certificate and Articles of Incorporation, as your application will be reviewed by an examiner, and then approved or denied. You will need to make a payment of $300 for Ontario companies and $200 for federal companies.

• Filing applicable Government Forms.  Once you have filed your Articles of Incorporation, you will also have to file certain forms with the Ontario Business Registry or Corporations Canada as applicable.
  • For an Ontario corporation, you will have to file a Form 1 – Initial Return with the Ontario Ministry within 60 days following your incorporation. This filing can be done through the Ontario Business Registry (see our guide to OBR here). The form will require the names and address for service for the directors and officers of the corporation. You will also have to indicate date of elections and dates of resignation, if applicable. registered address of the corporation.  Some of this information will be pre-populated for you. 
  • For federal corporations, if carrying on business In Ontario, you will have to complete a Form 2 – Extra Provincial Registration to obtain an Ontario extra provincial license. You will file a Form 2 as part of the incorporation application.

• Creating your Minute Book. A Minute Book is a physical binder or an electronic file that includes all of the organizational documents to effect the elections and appointments of directors and officers of the Corporation and the issuance of shares to the shareholders of the Corporation and keeps the corporate records that corporations are required to maintain. It documents the story of your corporation from the date of incorporation through to its winding up.

If you’re wondering whether or not you actually need a Minute Book, the answer is that you do. Both Ontario Business Corporations Act and the Canada Business Corporations Act require corporations to keep and maintain certain corporate records. These corporate records are kept in what we are now referring to as the Minute Book. Although some people choose to skip this step, we highly recommend that you do not skip this, as it is required by law, and especially if you are creating a corporation with more than one owner. By foregoing the Minute Book, you risk setting yourself up for conflict between yourself and your co-owner(s) if and when you sell your company. For example, if don’t have proper documentation to support who the shareholders are, you could have a dispute down the road over who owns what. Having a properly organized fully signed Minute Book will protect your rights with partners and avoid any he-said-she-said.

The organizational documents that are in your Minute Book will generally include a general and borrowing bylaw, the certificate and articles of incorporation, consents to act as directors, resolutions of the directors and shareholders, share certificates, registers and ledgers, the applicable government forms (i.e. Form 1/Form 2), NUANS report, share certificates and other corporate records required to be created and maintained under applicable law.

Incorporating by Yourself

Advantages of Incorporating by Yourself:

• Costs. Incorporating yourself directly through the Ontario Business Registry or Corporations Canada is the most cost-effective way to incorporate. If you have the time, resources, and experience to prepare the necessary documents, the cost to incorporate your corporation will simply be: (1) the government filing fee ($300 for Ontario corporations and $200 for federal corporations); and (2) the fee to obtain a NUANS report if you will be incorporating a named company.  The cost of getting pre-searches and a NUANS report will generally range from $13.00 to $100 depending on the service provider.

Drawbacks of Incorporating by Yourself:

• NUANS. If you are incorporating an Ontario corporation on your own, you will have to order a NUANS report from a third-party service provider or lawyer who has access to the government NUANS system prior to incorporating your company.

As mentioned above, the NUANS report will provide you with a list of names of registered business names, corporate names and/or trademarks that are similar to your proposed name.  The NUANS report does not guarantee that your name is compliant with the laws relating to corporate names set out in the Ontario Business Corporations Act and Canada Business Corporations Act. In addition, the NUANS search system is neither exhaustive nor conclusive. In either scenario, the NUANS report or the fact that your corporation was incorporated is not a defence if your corporate name is challenged at a future date because the name of your corporation is contrary to prescribed rules. You will be responsible for any losses suffered or resulting from confusion with existing corporate names, business names and trademarks.

If you are incorporating in Ontario, you will need to be to review the NUANS report before filing your Articles of Incorporation. You will not be prevented from incorporating in Ontario even if similar names appear on your NUANS report. If you are incorporating a federal company, your NUANS search will be assessed by an examiner at Corporations Canada who will send deficiency notices to you if your name is not compliant with the prescribed rules.

• Articles of Incorporation. It is true that there are many templates online for Articles of Incorporation. Corporations Canada provides you with optional language that can be used in your articles and offer templates for one classes of shares or two classes of shares. However, if you are not familiar with the provisions that should be included in the Articles of Incorporation, you may not only complete them incorrectly, you may not create the classes of shares you may ultimately want. If you don’t understand what these shares classes are and the different attributes they have, you may not be able to make the best choice for yourself when choosing a template.

As a quick summary, there are generally two broad categories of shares: Common shares (or participating shares) and Special or Preference Shares (or non-participating shares). Common shares will entitle the holder to participate in the growth of the company (i.e. a holder of common shares will be entitled to their proportionate share of the proceeds of sale of the business or to their proportionate share of the assets of the corporation upon its winding up). Special shares, on the other hand, do not entitle the holder to participate in the value of the company.  They simply entitle the directors of the corporation to pay a dividend to the shareholders of those shares. Special/Preference shares are generally used for income splitting and to effect certain tax reorganizations.

Regulated professionals should also be wary of filing on their own as governing bodies require the Articles of Incorporation of professional corporations to include specific restrictions on the business the corporation may carry on and restrictions related to the issuance and transfer of shares.

• Minute Book. The Minute Book is a relatively lengthier document and requires both time and knowledge to create. This is one of the main things that is missed when people incorporate on their own. Neither the Ontario Business Registry nor Corporations Canada provides a Minute book for your corporation. The documentation in the Minute Book provides direct evidence of who owns what. If you don’t have a Minute book in place, you leave yourself open to the possibility of disputes in the future about ownership or being unable to obtain signatures of the first directors of the corporation if they are no longer involved in the business years later. In the event that you want to sell your business, for example, the first thing a lawyer will request as part of their due diligence is your Minute book so that they can confirm who the directors/officers and shareholders of the Corporation are.  Ultimately, lawyers want to ensure that the people purporting to purchase or sell the business have the authority to do so.  The cost of obtaining a Minute years after incorporation may be significantly higher than if you did it from the outset.

• Lack of Legal Guidance/Advice. Another drawback is that you would not be able to take advantage of guidance or legal advice from an experienced professional. One implication of not utilizing professional expertise is that you may not end up issuing the number and types of shares that will be helpful for the growth of your business. The number and type of shares you issue will enable you to make decisions in the future regarding things such as adding your partner to your company, whether they will have decision-making power or not, etc.

Using an Online Document Filing Service

You may also opt to incorporate through a document filing service. There are many sites that offer this service. These websites can generate your Certificate and Articles of Incorporation, file an initial return, and generate a Minute Book with the organizational documents for you. Similar to the government website, these sites will ask you for information such as details like registered address, nature of your business, fiscal year-end, directors and officers, share classes, etc. Once you have entered this information, it will take you through a number of options where you can select which services you would like purchase at an additional cost (e.g. there may be, and usually is, an additional cost for filing an initial return, conducting a NUANS search, generating a Minute Book, etc.).

Advantages of Using an Online Document Filing Service:

• Costs. It may be more cost effective to use an online document filing service than most lawyers. There is also the advantage of the ease and convenience of going at your own pace, as well as the flexibility of submitting your information at any time of the day. Additionally, there may be a back-end administrative assistant that can assist you with your needs.

Drawbacks of Using an Online Document Filing Service:

• “Hidden” Costs. Although at first glance it may seem inexpensive to use this service, usually by the time you have clicked through all of the documents you require (such as a Minute Book), the price is significantly higher than what was initially advertised. If you opt for the bare-bones package of just generating your Certificate and Articles of Incorporation without paying any extra fees, you will essentially be paying an added service fee for something that you can do quite easily by yourself through the government website.

• NUANS. A document filing service may provide some basic analysis regarding your name, however, they are not lawyers, and are not regulated by the Law Society of Ontario. As such, they cannot provide legal advice.

• Articles of Incorporation. Similar to the government website, these DIY sites will ask you for information such as details like registered address, nature of your business, fiscal year-end, directors and officers, share classes, etc. These services cannot provide you with any legal advice if you are confused about what answers to provide or what share classes you require.  Document filing services may also offer templates and give you options for different classes of shares that you want your corporation to be authorized to issue. However, if you don’t understand what these shares classes are and the different attributes they have, you may not be able to make the best choice for yourself when choosing a template.

Note: Some Do-It-Yourself websites promote annual memberships for online access to your Minute Book. While convenient, this ongoing annuity may be unnecessary if there are no corporate changes to your company.  Based on our experience, it is very unlikely that you would need to amend your articles each year after you’ve incorporated.

Incorporating with a Lawyer

Advantages of Hiring a Lawyer:

• NUANS. If you incorporate with a lawyer, the lawyer will order and review the NUANS report with you and help ensure that your corporation manages risk related to its name.

• Articles of Incorporation. If you work with a lawyer, the lawyer will be able to draft your Articles of Incorporation to include any number of voting and non-voting common, special and preference shares to give you sufficient flexibility for the future to bring on partners, issues shares to family members, investors and/or employees. A big advantage of using a lawyer is the personalization of your documents. You may be the sole shareholder of your company right now, but you may want to reserve the right to issue shares to family members, friends, investors, etc. in the future – or you may want to make choices about who has decision-making/voting power in your company. For example, if you and your spouse will be equal partners on a corporation, you may want to create separate classes of common/participating shares in order to provide flexibility for sending out dividends. If you have children, you may want your articles to authorize the issuance of multiple classes of non-participating shares in order to be able to facilitate income splitting with, if available and recommended by an accountant. All these determinations should be reflected in the classes of shares that are available – which should be set up during the incorporation process.

• Minute Book. Hiring a lawyer will save you the time and hassle of creating your organizational documents. A lawyer who is familiar with the incorporation process will be able to provide you with legal advice and support. For example, based on the nature of your business needs, a lawyer may recommend setting up your business in ways which will optimize your corporate tax planning opportunities, including setting up a holding company as well as an operating company.

• Legal Advice. Overall, a lawyer will be able to provide advice on different corporate structures to enable you to optimize your corporate tax planning and creditor proofing structures, and save you time and money by explaining why this might not be the right option at this point in your business. You will also be able to build a relationship with a business lawyer who will be able to assist you with anything you need down the line in relation to your business.

Drawbacks of Hiring a Lawyer:

• Costs. Generally speaking, incorporating with a lawyer is the most expensive option, so this option may not be ideal for cost-sensitive individuals.  Most law firms charge between $1250 and $1500 or more to incorporate.

What we do at Ordower Law:

At Ordower Law, our philosophy is simple: we offer incorporation packages at the price of an online document filing service, but with the advantage of having the expertise of lawyers with years of experience under their belt. Simply put, we have the lawyers, technology, and back-end processes to generate all of your documents and incorporate your company with a quick turn-around time of 1-2 business days. We believe that our law firm offers the best of both worlds – you get the lawyer experience at the price of an online document filing service.

We offer all-inclusive packages. Our current pricing is: $799 for federal incorporations and $899 for Ontario incorporations (including all government filing fees and disbursements). Our packages include:

• Electronic Minute Book
• Articles & Certificate of Incorporation
• Corporate By-Laws & Resolutions
• Share Subscriptions & Share Certificates
• Registers & Ledgers
• Form 1 & Form 2 Initial Returns
• Corporate Name Searches (Pre-Nuans & Nuans)
• Business Number/Tax Accounts from CRA
• Electronic Signing through Docusign
• Legal Advice & Consultation

For additional information, please feel free to contact us by phone at 416.849.1900, or schedule a call with us by clinking the link below

For more general information on incorporating in Ontario or starting a business in Ontario, please view our guide here: Incorporate in Ontario and Canada- Everything You Need to Know.