Types of business structures

Sole proprietorship

A sole proprietorship is a business with a single owner who alone is responsible for all liabilities—legal debts a company owes to third-party creditors. Sole proprietorship is one of three ways of organizing a business in Canada, the other two methods are a general partnership and incorporation. Each has its own operational, accounting, tax and legal requirements.

Partnership
A partnership is established between two or more owners who associate themselves as partners to earn income. Starting a partnership might require an agreement, but can also start with implications. 

Incorporation
A corporation is a legal entity that exists under authority granted by provincial or federal law. It stands legally separate from the owners, and it does business in the name of the corporation. 

Provincial Incorporation
You can incorporate your business in a single Canadian territory or province. Each provincial incorporation is a stand-alone process. The country is separated into provinces—much like a state in the U.S.—and include Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island, Quebec, Saskatchewan, Northwest Territories, Nunavut, and Yukon.

Once incorporated in one of the provinces, you may secure your company’s name and conduct business in that sector. To do business in another province, you will need to register with the appropriate provincial authority.

Federal Incorporation 

The main difference between federal and provincial incorporation is that federal incorporation gives your business increased business name protection and wider rights to carry on business throughout the entire country.

Federal incorporation of your business means that you will be able to do business across Canada under the same business name, even if another company is already using a similar name in another province or territory. So if your federally incorporated business is named XYZ Inc., your company can do business in any province or territory as XYZ Inc., even if there are other companies with identical names operating in those same provinces or territories.

This is not the case with provincial incorporation. When you incorporate your business in a particular province or territory, you are only entitled to operate your business in that jurisdiction and have no name protection outside that province or territory.

Let’s use an example. If you incorporate your business in Ontario and then later decide you want to do business in Manitoba, you can register your Ontario corporation in Manitoba. However, there’s no guarantee that there won’t be other businesses with the same or similar business name—meaning that your company may not be able to operate in that province under your chosen name at all.

Additionally, when you’re considering the differences between federal and provincial incorporation in Canada, Corporations Canada points out that federal incorporation has a cachet that gives a company global recognition.

Although provincial and federal incorporation is an “either-or” proposition, if you choose federal incorporation, you will need to register your company in any province or territory where you conduct or operate business in.

Cooperative 

A corporation is an organization owned by the members who use its services. They can provide any services or products and can be either for profit or non-profit. For example, Best Western, One of the largest hotel chains in the world, is a co-operative (well, a “nonprofit membership organization”) of more than 4,000 independently owned and operated hotels in 100 countries. It was the one of the first hotel chains to offer guests internet access, way back in 1995. (source: medium.com)

Steps of incorporating your business

Step 1: Choose a corporate name for your business

Every incorporated business must have a name that legally identifies it. This is called a corporate name. The first step to incorporating is deciding on how you want to name your corporation.

Your corporation can have either a corporate:

• word name made up of letters and symbols; or
• numbered name, for example, 12345678 Canada Inc.

A numbered name is the simplest way to name your corporation because all incorporated businesses are assigned a unique number but can operate under a different name.

With a word name, you have the legal right to use it across Canada once Corporations Canada approves your name. To get a word name, make sure to choose custom incorporation when you start incorporating online.

Step 2: Create your articles of incorporation

This step establishes the structure of your corporation. There are two types of incorporation that you can choose from, each with its own pros and cons.

If you are incorporating a small, private business, consider choosing basic incorporation. This pre-packaged incorporation option takes the guesswork out of this step, and your corporation will have:

• pre-determined articles of incorporation (you can amend them later, as needed)
• one or two classes of shares
• a maximum of 10 directors
• an assigned, numbered corporate name.

Alternatively, you can customize your articles of incorporation to suit your specific business needs. In this case, choose custom incorporation and specify:

• your corporate name
• your share structure and any restrictions on share transfers
• your corporation’s number of directors
• any restrictions you might want to set for your business or business activities
• any other provisions.

Language of the articles

Your articles of incorporation can be in the official language of your choice. They can be:

• in either official language (English or French)
• in both official languages (English and French)
• bilingual (using both official languages equally).

Step 3: Establish the initial registered office address and first board of directors

Every incorporated business must have a registered office address and a board of directors.

The registered office is where you must keep your corporate records and where official documents will be served on the corporation. Choose an address where you will be sure to receive any documents sent there since, legally, they will be assumed to have been received by the corporation.

You also need to decide who will make up your corporation’s board of directors. Check the director requirements to make sure your directors meet the eligibility criteria. When you incorporate, you have to disclose each director’s first name, last name, address and indicate whether or not they are a Canadian resident.

Step 4: Submit and pay the fee

The fastest and simplest way to submit your incorporation application and pay is through the Online Filing Centre.

Checkout Ownr, an online platform that makes it simple and affordable for entrepreneurs to start and manage their businesses by automating routine legal work. Since 2017, Ownr has helped thousands of entrepreneurs start and manage their businesses. Get 25% discount on your Ownr registration using this link. 

Is Ownr right for you?

Ownr’s services are designed for aspiring entrepreneurs looking to register or incorporate their business and existing business owners looking to automate business legal needs, without high legal costs. Ownr provides automatic filings, a host of legal agreement templates, live support, and more. Check out these articles to learn more on how can Ownr help you incorporate your business:

1. Why Do People Become Entrepreneurs
2. Sole Proprietorship vs. Corporation: How To Choose
3. How to Incorporate a Business in Canada

Social Entrepreneurship

Non-profit organization

A non-profit organization is a club, society or association that is organized solely for social welfare, civic improvement, pleasure or recreation, or any other purpose except profit. 

Registered Charity 

Registered charities are charitable organizations, public foundations, or private foundations that are created and reside in Canada. They must use their resources for charitable activities and have charitable purposes that fall into one or more of the following categories:

• the relief of poverty
• the advancement of education
• the advancement of religion
• other purposes that benefit the community

B-Corp 

Certified B Corporations are a new kind of business that balances purpose and profit. They are legally required to consider the impact of their decisions on their workers, customers, suppliers, community, and the environment. This is a community of leaders, driving a global movement of people using business as a force for good.

Fairtrade 

Fairtrade International is a non-profit, multi-stakeholder association that brings together all actors in the Fairtrade system to coordinate Fairtrade’s global strategy. 

Provincial Registration of Business:

• Ontario
• Quebec
• Manitoba
• Alberta
• British Columbia
• New Brunswick
• Prince Edward Island
• Nova Scotia
• Northwest Territories
• Nunavut
• Newfoundland and Labrador
• Yukon