Forming a company and starting your own business may be the greatest adventure you will ever take. However, forming a company is also a difficult process and requires extensive planning. To be successful you will need to set realistic goals, know your strengths and weaknesses, be prepared to face obstacles, and know your financial resources.
This article will provide future business entrepreneurs with guidelines as to what to consider when forming a company.
Generally speaking, a company can be defined as an institution created for the purpose of conducting business and making a profit. In terms of legal definition, a company is defined as a legal entity which allows a group of people, as shareholders, to apply to the government for an organization to be created, which then pursues set objectives.
The advantage of a company structure is that it provides the shareholders with a right to participate in the profit-making without any personal liabilities.
Decide What Kind of Business Structure is Best for You
You should decide on what type of business company is best for you depending on your needs and goals. The three available options are a sole proprietorship, a partnership, or a corporation.
A sole proprietorship is a form of business owned and operated by one person. It is not considered to be a legal entity under the law, but it still requires permits and licenses depending on the type of business. The owner has possession of the business assets and is responsible for the liabilities incurred by the business. The accumulated income of a sole proprietorship is combined with other earnings of the owner for income tax purposes.
A partnership is a profit-motivated business where at least two individuals are involved. A partnership can be registered with the government within sixty (60) days from the creation. Registration involves paying a fee to the government. However, creating a partnership agreement is a more complex task. The partnership agreement details rights, responsibilities, and obligations of common partners. Any partner is responsible for all liabilities of a partnership. Importantly, a partnership does not have to file a separate income tax report. Instead, each partner includes the financial information of a partnership with a personal income tax report.
A corporation is a legal entity which exists under the authority granted by either a federal or provincial law. A corporation has legal rights and is responsible for all liabilities. Therefore, a corporation must file annual income tax report with Revenue Canada(federal) and the Ministry of Finance (provincial). Generally, the owners or shareholders of a corporation are protected from most of the corporate liabilities.
Essential Elements of a Company
Each company must have the following elements before it can be registered:
a minimum of one share;
a minimum of one shareholder;
a registered office; and
an address for service.
Choosing a Name for Your Company
Choosing the right name for your company is vital to the success of your business. You should choose a business name that is unique, easy to remember, and describes the products and services that your business provides.
Applying to Register Your Company
As a business owner you may need to register your company with different levels of government for different reasons. Before filing an application of registration, a business owner must perform a name search to determine what business names are already registered. If your chosen name is not already registered then you can proceed with registration of your business. You will need to register your business name, apply for business accounts, and get a Master Business Licence. The fastest way of registering your business is by doing it online at the Canada Revenue Agency website at www.cra.gc.ca.
You can incorporate your business provincially in Ontario according to the terms of the Business Corporations Act (Ontario) (the ‘Act’). The incorporation process includes filing Articles of Incorporation together with supporting documents, and paying the required fees. It is the responsibility of the incorporator to ensure that Articles of Incorporation are properly filed with the Ministry of Government and Consumer Services in accordance with the ‘Act’ and conform to law.
The incorporator can either incorporate his or her company as a numbered corporation or a named corporation.
Incorporation can be either done online, in person, or by mail. You can access the necessary forms on the Government of Canada website at www.canada.gc.ca
Advantages of Incorporation
There are several advantages of incorporating your business. These include:
increased likelihood of receiving financing;
given perception of stability and determination;
eligibility for government programming, like government grants;
Increased likelihood for working with other companies; and
enhanced public perception.
This article provides potential business entrepreneurs with basic guidelines for starting a business and forming a company. The article provides a legal definition of a company together with the description of business organization. Each type of business organization has advantages and disadvantages. As a future business owner, you need to decide what type of business structure works best for you. The article also outlines the essential elements of a company and advantages of incorporation. Future business owners must keep in mind that entering the business industry is a risk-taking procedure, therefore extensive planning is required.
Seeking the Advice of a Professional
If you have decided it is time to seek the advice of a professional ensure to email us your contact information and one of our lawyers will contact you promptly.
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