Setting Up a Canadian Corporation

Incorporating a business can have a variety of different advantages. These include, but are not limited to:

  • Tax deferrals
  • Dividend sprinkling
  • Capital gains exemption
  • Litigation protection

These benefits can be great, but they don’t come without a price. Cash flow should be steady in order to justify the costs. For many businesses, the added costs can be well worth it.

What are the costs associated with a corporation?

Incorporation costs

If you pay these fees online, then you will only be looking at around $300. If you end up hiring a lawyer to help you, then you may be paying upwards of around $1000 or so.

Accountant costs

A simple corporation will usually pay around $800 to $1000 to file their business taxes every year. An accountant is usually required to ensure that all tax breaks are accounted for. The good news is that the tax breaks will usually end up paying for these fees, and then some.

Now, take a look at the processes that go along with setting up a corporation. Here are a few things to consider:

Federal or Provincial?

These are both viable options for businesses. A federal incorporation will usually give your company a bit more protection, and it also gives you the freedom to relocate into other provinces. There is more paperwork required for it. Provincial incorporation will not have as much paperwork, and they may be suitable for businesses that don’t plan to move out of their province.

Company Name

A company name should be unique. The federal incorporations will usually have a larger database of businesses, so the name that you choose may already be taken. If you plan to have an online business, then you need to consider a domain name as well.

Share Structure

You will want to determine how you will want the company share structure to be. Will there be separate classes for the shares? If you have a difficult time with this, then you can consider hiring an accountant to help.

Registration

You will want to determine how you will register the incorporation. You can either do it yourself online, or you can hire an attorney to help you. If you plan to do it online, it is a pretty straight forward process. If you have a complex business, then you might want to hire an attorney.

End of Year

Once you have formed your incorporation, you will want to decide the year end. You may choose a calendar year end, or you may choose a fiscal year end.

These are a few of the things that should be considered if you are thinking about incorporating your business. This is just a starting point, but if you want more information it is a good idea to consult an accountant or attorney.