Are you self-employed, running a successful business and considering taking it to the next level by incorporating it? Well then, you’ve come to the right place!
In this article, our business incorporation experts explain how to incorporate your business in five steps. But first, let’s go over the concept of an incorporated business to make sure that we’re all on the same page.
- Incorporated businesses at a glance
- How to incorporate a business in 5 steps
- How to incorporate on your own
- Incorporate your business in Quebec and achieve success!
Incorporated businesses at a glance
There are three different types of for-profit legal business structures in Quebec. One of the three is a corporation, which is also known as an incorporated business or a company.
Incorporated businesses are usually identified by one of the following: inc., incorporated, ltd., limited, Corporation or SA. However, the following characteristics are what truly sets an incorporated business apart from other types of companies:
- It exists separately from its shareholders
- It can own property in its own name
- It has its own rights and liabilities
- It can sign contracts via its directors
- It can sue or be sued
The benefits of incorporating your business in Quebec
There are many advantages to incorporating your business. Here are a few that will reaffirm your choice to incorporate:
- Less tax to pay to Revenu Québec
- Less financial responsibility for shareholders
- The opportunity to split corporate income
- The opportunity to accrue income and use it at a later date
- No need to have a board of directors (for provincial corporations only)
- Simplified business financing
- Continuity of existence
Federal vs. provincial incorporation
There are two types of business incorporations: provincial and federal. Federal incorporations are more expensive than provincial ones. That being said, if you intend to expand your business to other provinces, it’s better to incorporate federally.
If your business is limited to Quebec, you can opt for provincial incorporation. We strongly recommend having an incorporation specialist guide you through the process so that you can discuss your short- and long-term goals and make the right decisions from the start.
If you opt for a federal charter but have your head office in Quebec, you’ll still need to register your business with the Registraire des entreprises du Québec. All businesses located in the province must be registered.
Then, you’ll need to start the process with both governments and begin creating your company’s legal organization in the minute book. This will include electing a president, establishing company by-laws, issuing share certificates and drawing up resolutions. These steps can be done in one of two ways: by enlisting the help of a traditional law firm or using an online solution.
How to incorporate a business in 5 steps
1 – Determine your company’s jurisdiction
Before incorporating your business, you’ll need to determine its jurisdiction. The choice of jurisdiction determines how the company will operate and what rules will apply to it, so you’ll need to do your research, plan ahead and figure out which option will best suit your business.
Each jurisdiction is governed by its own laws and specific features. For the purposes of this article, we will focus on business incorporated under the Quebec Business Corporations Act (QBCA), but federal incorporation is also an option.
2 – Name your corporation
Once you’ve determined your corporation’s jurisdiction, you’ll need to give it a name. Although there are different ways to register a business, at this stage of the process, many business owners let the Registraire des entreprises du Québec assign them a numeric designation, which consists of a unique number, the word “Québec”, and the abbreviation “inc.”
Some entrepreneurs prefer to give their corporation a real name rather than a cold, impersonal number. In that case, you’ll need to choose a name that complies with the Registraire’s naming standards and rules.
The name of a business is usually made up of a generic component (its general designation), a specific component (that distinguishes it from others) and a particle (Inc. in this case). You cannot choose a name that is already in use by another company in Quebec, does harm to others or contains false information.
3 – Reserve a name with the Registraire
If you’ve found the perfect name for your corporation and want to make sure no one else can take it, you can request a name reservation from the Registraire. Simply file your name reservation request using the Registraire’s online service. Note that this step is completely optional.
4 – Compile the necessary documents
Once you’ve chosen the name of your business, you’ll need to prepare and submit the documents necessary for incorporation.
First, you’ll need to submit the articles of incorporation, which define the corporation’s share classes and the rights associated with them.
You’ll also need to submit the initial declaration, which contains essential information about your business, including its sector, the location of its headquarters and the names of its shareholders and directors.
5 – Pay the fees, obtain your certificate and finalize the incorporation
At this point, you’re fairly far along in the incorporation process. However, it’s not time to celebrate just yet—you still need to pay the Registraire fees that cover the cost of processing the initial declaration.
If the relevant authorities determine that your application is in order and the required fees have been paid, they will issue a certificate of incorporation and assign it a date.
Your company will be registered and assigned a Québec Enterprise Number (NEQ). Then, your articles of incorporation, any attached documents and the certificate of incorporation will be filed with the Registre des entreprises.
Congratulations! Your business is now incorporated in Quebec.
How to incorporate on your own
While it is entirely possible to incorporate on your own, our tax experts don’t recommend it, particularly if your company has more than two shareholders. When there are multiple people at the helm of a company, disputes tend to occur more frequently. For that reason, we recommend signing a shareholders’ agreement when incorporating a company.
The main advantage of incorporating on your own is that it’s less expensive. That being said, there are also disadvantages, such as not automatically receiving a book that contains the official legal organization of your company and its resolutions.
Regardless of how you choose to incorporate, you will be able to obtain your certificate of incorporation. With your certificate in hand, you can open accounts with Revenu Québec and the Canada Revenue Agency (CRA), as well as bank accounts for your business. It’s best to reflect carefully on how you want to incorporate and weigh the pros and cons.
Incorporate your business in Quebec and achieve success!
Now, you’ve learned everything you need to know about incorporating a business in Quebec. We wish you success with your new venture!
Don’t hesitate to enlist the services of a lawyer and other specialized professionals, particularly if your corporation has multiple shareholders. T2inc can help you take care of the administrative procedures and make the best decisions for your company. Contact us to discuss your projects and benefit from personalized support.