How to start a business in Ontario ?
Ontario is the most populous Canadian province and is central to every international business strategy targeting Canada. Indeed, the province’s most important city, Toronto, is a major business center, and the Ontarian dynamic economy is attracting an ever-growing number of entrepreneurs and startupers. So, what steps must you take in order to start your business in Ontario?
Firstly, you must choose the legal form of company that best suits your needs. There are several legal entity form, such as the sole proprietorship, the general partnership, the limited partnership, the joint venture, the non-profit legal person, and the business corporation. This article focuses on the most popular option among entrepreneurs, which is the business corporation.
Why open a business corporation?
The business corporation, also simply called “corporation”, is a legal entity and is distinct from its members. The company will therefore generally only bind itself through its actions and decisions.
This type of enterprise has advantages such as the possibility to allocate power among different directors, the possibility to distribute the income to the shareholders in a flexible way and, of course, the limited liability of shareholders.
However, the costs associated with the creation of a business corporation in Quebec may be higher than for other types of enterprises and the management rules, more complex. Also, the business corporation is constituted with state intervention, and every change requires certain government declarations and statutory amendments to be made, along with the payment of any associated costs.
How to register a business corporation in Ontario?
In Quebec, a business corporation can be constituted under the federal jurisdiction through the Canada Business Corporations Act (CBCA), or under the Quebec provincial jurisdiction through the Ontario Business Corporations Act (OBCA). The constitution formalities under these two laws are similar. The OBCA is a popular choice, as the obligations regarding the choice of the corporation’s name are less severe than under the CBCA, and as it is a provincial law that is generally well-known to directors, investors and lawyers. However, you must keep in mind that, when planning to conduct business across Canada and not only in Ontario, the CBCA might be a better choice for you.
If you decide to register your corporation under the OBCA, the first step will be to choose the name of the corporation in compliance with the different naming requirements and prohibitions. For instance, the OBCA requires that the name contain one of the words “Limited”, Limitée”, “Incorporated”, “Incorporée” or “Corporation”, or their abbreviations, “Ltd.”, “Ltée”, “Inc.” or “Corp”. One must also obtain a computer-generated Newly Upgraded Automated Name Search (NUANS) report, which will allow you to determine if the proposed corporate name is available before filing incorporation documents.
Then, you must address some pre-incorporation logistics steps, such as ordering a minute book, where the minutes and resolutions of the board of directors, the minutes and resolutions of the shareholders, the certificates and articles of incorporation, the by-laws, the unanimous shareholder agreements and, if applicable, the securities register ledger, the register of transfers and the share certificates, will be kept. You must also determine who the initial directors and officers of the corporation will be, as well as who is to act as the corporation’s incorporator (i.e., the person who executes the articles of incorporation and organizational resolutions, which are crucial steps allowing the corporation to come into existence).
When it comes to the procedural steps that must be undertaken to form and organize the corporation, the process starts with filing the articles of incorporation with the Ontario Business Registry. Then, the governance rules of a corporation are to be set by the by-laws. These usually cover areas such as the procedures to follow for the meetings of shareholders, the issuance of shares, etc. Shareholders might also decide to enter into a unanimous shareholder agreement at the moment of incorporation in order to decide on matters such share transfer restrictions, for instance. The initial directors, in turn, will also pass their organizational resolutions, concerning the issuance of shares, the by-laws, the appointment of officers, etc.
Once the corporation is incorporated and the directors and officers are elected, several steps must be undertaken for the post-incorporation logistics, such as obtaining extra-provincial licences or registrations if you consider carrying on business in other Canadian provinces or territories.
Following the registration and incorporation of your corporation, the next step is for you to embark on your business adventure in Ontario! Nonetheless, you must keep in mind that operating a corporation is a continuous process, and that some obligations are to be fulfilled throughout the existence of the corporation.
To learn more about the Ontario Business Corporation Act (OBCA), the Canada Business Corporation Act (CBCA) and about doing business in Ontario or in Canada, contact the Law Office of S. Grynwajc today. We are admitted in Canada, and understand all of the applicable local and federal requirements.