Pivot Legal

What Should You Think About Before You Incorporate?

Deciding to incorporate is not a simple matter: this list sets out ten questions to ask yourself before you proceed. These are not the ONLY questions you should ask, of course, but they encompass some of the most common issues that arise when creating a new corporation.

1. Why am I incorporating?
Think about the reason for incorporation: is it to reduce your liability, to govern the relationship between several people working together, for tax reasons, or something else? You may find, when you think about the reasons, that incorporation is not right for you at this time, or that some other approach will be better.

2. Do I need to incorporate federally or in BC?
If you are intending to carry on business outside BC, you may find that federal incorporation is preferable.

3. Will the corporation need to register in other provinces?
The answer to this question will depend upon what activities, if any, you are carrying on in those provinces.

4. What name do I want for the new corporation?
Your name will have to have certain elements required by law, and it will be rejected if it is likely to cause confusion with the name of another business.

5. What kinds of shares will it have?
The answer to this question may depend upon the advice of your accountant. You may decide to have only one class of shares, or you may create many different classes of shares with different rights and restrictions.

6. Who will get shares, and how much will they pay for them?
You may have only one shareholder, or many shareholders. Again, the amount they pay for their shares may be small or large, and can have tax consequences.

7. Who will the directors and officers be?
The directors are elected by the shareholders, and have overall responsibility ofr the well-being of the corporation. Officers are appointed by the directors, and are responsible for the day-to-day running of the corporation.

8. Where will the corporation keep its records?
By law, the corporation must keep certain records in a location where they may be inspected by members of the public.

9. Do we need a shareholders' agreement?
A shareholders' agreement is a powerful tool for regulating the way the corporation operates, and for putting in places mechanisms which can be used to provide for resolution of any future disputes between shareholders.

10. When will the corporation's financial year end?
This is a question for your accountant or other tax adviser.