Incorporating A Company In British Columbia: A Step-By-Step Guide
The benefits of incorporating a company in BC include reduced liability, better access to financing, it becomes easier to transfer or sell shares, lower tax rates, and increased credibility.
In this article, we will be looking at the process of incorporating a company in BC and what the steps are.
Incorporating In British Columbia
The decision to incorporate a business is dependent on the needs of the business owners and the goals they have for their company.
Once a company is incorporated, it receives all of the rights of an individual, as well as an unrestricted life expectancy and an independent existence apart from its stockholders.
Once incorporated, the company can obtain assets or sign contracts. It can be liable for accounting or other legal service fees as needed.
All businesses that choose to incorporate must do so according to the requirements of the Business Corporations Act.
Individuals who are planning to incorporate in British Columbia need to keep in mind that they need clear corporate records, which are also required as per the Business Corporations Act.
What Information Is Needed To Incorporate A Company In BC?
The following information is needed when incorporating a company in BC:
1. Your company name
This needs to be a unique name that hasn’t been claimed by another business yet. The BC Registry Services database is a good resource where you can cross-reference names.
2. Articles of incorporation
Articles of incorporation outline the rules and structure that your company has. Examples of what will be included in this document are the business name and how many directors it would have.
3. Incorporation agreement
This important file will clearly state the rights and responsibilities of the company's shareholders and directors.
4. Director information
All relevant information about the directors of your company needs to be included here, such as their names, addresses, and birth dates.
5. Registered office address
Keep in mind that this will be the designated address where official notices and documents are delivered for your business.
Steps To Incorporating A Company In British Columbia
There are five steps to follow when incorporating.
1. Confirmation of your chosen business structure
Which type of business structure you choose will depend on your business goals and preferences. It is best to consult a professional during this process, as it’s not always a straightforward answer.
2. Consider which name you will use for your business and reserve it
During the second step to incorporate in BC, you can use BC Registries and Online Service to request and reserve your company’s name. This will come at a $30 fee.
This will ensure that you get your business’s name approved and that it isn’t already in use by any other corporation. If you have an incorporated company, it needs to have a corporate designation as well, such as Ltd or Inc.
You can make use of your incorporation number for a company name. If you choose this route, you can skip the process of requesting and reserving a name. You will receive the number once your company’s incorporation is filed which takes a week or two.
Following this, you will get a name reservation number. You will use this to incorporate your business. Keep in mind that your reservation could expire after 56 days if you have not used it. If you need a faster turnaround for your business’s name approval (one to two business days), you can request a priority service. This costs $100.
3. Create the company's articles
The company articles include all rules for stakeholders and other parties. They will be kept on record as official company documents.
You have the option of referencing sample articles here or you can consult a lawyer to create the articles.
Some business structures have additional tasks to consider:
Benefit companies are required to have a benefit statement as per their articles.
Company contribution businesses need to have details of their primary community purposes.
Unlimited liability companies must have the following statement included in their articles: "The shareholders of this company are jointly and severally liable to satisfy the debts and liabilities of this company to the extent provided in section 51.3 of the Business Corporations Act."
4. Put together an incorporation agreement
Every person who is forming the business needs to sign this agreement. Called incorporators, they will usually be shareholders or directors when the business is incorporated in BC.
The incorporation agreement will state the number of shares an incorporator will have, names, and signatures.
This document might be requested by the bank when you open a bank account for the business. It does not need to be filed online but needs to be kept as part of business records.
5. Apply to incorporate in BC
The first consideration in this step is what the cost to incorporate in BC is. Most companies can opt to apply using Corporate Online. This costs $350, or $1000 for a ULC.
Benefit companies can apply using the online BC Registry application. This will also be at a $350 fee.
Corporations in British Columbia that will conduct business in other provinces, as well as out-of-province corporations that do business in British Columbia, are required to file extra provincial business registration.
During the process of incorporating in BC, the name request number for your business is needed. If you are having trouble registering online, you can request a law firm to help you submit the hard copy document on your behalf.
When the incorporation is processed, you will get several documents that include your original Certificate of Incorporation, a certified copy of your Incorporation Application, as well as a certified copy of your Notice of Articles. Together with these documents, you will receive a cover sheet with your incorporation and business number.
The Benefits Of Incorporating A Company
Incorporating in BC comes with several benefits. These include:
Being in a more favorable position to sell shares.
Raising capital.
Transferable shares that make it easier to sell or transfer the business.
Tax benefits.
Incorporation also allows for name protection, which means a company can retain its business name.
Business Structures In BC
When making a decision whether to incorporate in British Columbia, it is important to decide on a business structure.
Here are some of the main business structures available to small business owners:
Sole Proprietorship
If you want to go for a simple, straightforward business structure, this might be a good fit. Keep in mind, you will have a high level of personal liability and you could face higher tax rates.
General Partnership
A general partnership can assist with an easy start and a less complicated process when filing tax returns. This structure also makes pooling resources hassle-free. However, just as with a sole proprietorship, there is a lot of personal liability.
Limited Partnership
A limited partnership offers bigger potential to raise capital for a business, but it can prove more costly to set up than other structures. A consideration for setting up this structure is to have concise agreements in place between shareholders and the general partners. This will ensure that no problems arise in the future.
Limited Liability Partnership
In this structure, limited partners have reduced obligations, and their interests can be transferred. General partners will not have these same reduced liabilities and will still be held accountable for financial and legal costs.
BC or Federal Corporations
Corporations come with lower tax rates as well as reduced liability. Capital can easily be raised in this structure, but bear in mind that a corporation is often closely regulated. It will cost more than other, simpler structures, such as a sole proprietorship.
A federal corporation is a legal entity that exists independently of its owners. However, it can still exercise individual legal powers, such as owning real estate, investments, or buying assets. A drawback is that corporations face stricter regulations than other structures such as partnerships and sole proprietorships. Their losses must be replenished by earning within the corporation. Also, it can be expensive to bring a federal corporation into existence.
Benefit Company
A for-profit business that pledges to further one or more public benefits is known as a benefit corporation. Public benefits, such as those for communities, organizations, or the general public, must benefit parties other than business shareholders.
All of the benefits of a BC corporation, including limited liability and lower corporate tax rates, are enjoyed by benefit companies. It also actively advances the public good, which may increase employee engagement and improve the company's standing.
However, a benefit company faces most of the drawbacks of a BC corporation, such as greater initial costs and recurring expenses.
Community Contribution Company (CCC)
A CCC, also called a C3, merges for-profit and non-profit characteristics. It usually has a board of directors and shareholders and has a social purpose. Compared to a proprietorship, partnership, or ordinary corporation, CCCs are more complicated and expensive to set up and manage. There are also restrictions on staff and management salaries, the potential returns to shareholders, and their eligibility for grants or donations.
Cooperative Association (Co-op)
Co-ops are member-owned businesses in British Columbia that provide products and services to the community. They are incorporated and driven by values, not just profit. They create jobs and support communities. These structures are more challenging when it comes to setup, and they could be capital-constrained.
How To Choose The Right Business Structure
Three common business structures in BC include sole proprietorship, partnership, and corporation.
Some key comparisons here are that a sole proprietorship is a one-person business where the owner is personally liable for all debts and losses, whereas a partnership is a business owned by two or more people who share profits and losses. A corporation, as discussed earlier, is a separate legal entity from its owners, and shareholders are not liable for the company's debts.
It is important to weigh up these differences in relation to your business goals. If you want more autonomy, a sole proprietorship might be a more feasible route to take, while if you want less financial risk, a partnership could be a viable option.
Also, if you want reduced liability, a corporation can allow you more security from a financial point of view.
Summary
You can incorporate yourself or hire a lawyer to help you with the process.
A good business lawyer can help you figure out which type of structure you should use.
Although incorporating requires some work it also reduces risk, can reduce tax obligations, can improve access to financing, and generally makes it easier to sell or transfer the business.
FAQ
What does incorporation mean?
Incorporation is the legal process by which a company or corporate entity is formed. There are several things that a corporation can do, such as buying property or holding bank accounts.
How long does it take to incorporate a business in British Columbia?
Incorporating a named corporation will take 4 to 5 business days. Keep in mind that when a corporation's name still needs to be approved, this will take 10 to 15 business days.
What are the ongoing compliance requirements for BC corporations?
Corporations need to keep a transparency register updated and this needs to be reviewed yearly. This includes reviewing information such as beneficiaries, or other individuals who have shares in the business.
Do I need a lawyer or accountant to incorporate my business in BC?
It is not compulsory to make use of a lawyer or accountant. However working with a lawyer and an accountant can greatly simplify setup, yearly filings, and general compliance.
Can I change my business structure after incorporation?
You will need to complete a notice of alteration, which will need to comply with the stipulations of the Business Corporations Act.
What are the tax implications of incorporating your business In BC?
There are three key tax benefits of incorporating in BC. These include:
1. Lower tax rates (when compared with personal tax rates).
2. Income division and dividends allow for savings on taxes.
3. Up to $913,630 in one-time capital gains deduction can be claimed.
It is important to always consult with a professional regarding what the tax implications of incorporating will be for your business.
Can non-residents of Canada incorporate a business in BC?
Yes – citizenship is not required to incorporate a business in British Columbia. However, you must have a valid work permit, a physical business address, and all non-Canadians will need to submit an Investment Canada Application
Sources:
https://www.corporateonline.gov.bc.ca/WebHelp/overview_noala.htm
