Congratulations on Incorporating Your Business! Here’s What You Need to Do to Stay Up-to-Date and Compliant with the CRA.

Remember, You Are No Longer Your Company.

As a separate entity, your corporation has the power to enter into contracts, pay and receive money, sue, and be sued. Therefore, you should avoid doing business in your personal name and instead use and incorporating your company’s name for all contracts, agreements, and other documents. This will protect you from personal liability in case something goes wrong. (Note: there are instances where directors can be personally liable, so consult with your small business lawyer if you have any concerns.)

Also Read: Marginal Tax Rates in Canada

Here are the steps you need to take after incorporating and some important things to remember:

Step 1: Register Your New Corporation with the CRA

The process of obtaining your CRA Business Number will depend on the type of incorporation you choose. For federal corporations, the process is instant. However, for provincial corporations, the process can take longer and may require additional registrations.


Step 2: Open a Corporate Bank Account

Now that your business is incorporated, you are ready to start operating. Remember, your corporation is a separate legal entity from you and needs a separate bank account. This account will allow it to own assets, transact business, and receive payments. To open a corporate bank account, the bank may require you to provide the corporation’s certificate and articles of incorporation. You will also need to fill out some bank forms.


Step 3: Organize Your Corporation

Organizing your corporation involves creating a structure and assigning responsibilities within the company. After incorporating, the incorporators or first directors must hold the first meeting of directors to organize the corporation or sign organizational resolutions. During this meeting, the corporation will:

a) Issue Shares: The corporation will issue shares from its authorized share capital. For small and medium-sized enterprises (SMEs), the incorporator may be the sole shareholder. The corporation will create and issue share certificates for each shareholder as legal proof of share ownership. Share certificates show the class and number of shares held by each shareholder. If there is more than one shareholder, prepare a Shareholders Agreement.

b) Appoint Directors: Shareholders will appoint directors to oversee the corporation’s activities. If there is only one shareholder, that person can also be the sole director.

c) Appoint Officers: The directors will appoint officers, such as President, Secretary, and Treasurer.

d) Create Registers and Ledgers: The corporate register lists the corporation’s shareholders, directors, and officers. The shareholders’ ledgers show the class and number of shares held by each shareholder.

e) Appoint an Accountant: The corporation should appoint an accountant to manage its financial records.

f) Minute Book: Keep all corporate records in a minute book, including the Certificate of Incorporation, Articles of Incorporation, General Corporate Bylaws, Banking Bylaws, minutes of company meetings, agreements, and resolutions, copies of initial returns and forms filed with the Ministry, ledgers and registers, incorporating and share certificates. Keep your corporate records up-to-date and in compliance with the law. Organize your minute book and keep it updated by a professional.


Step 4: Determine if your corporation needs to charge GST and/or PST.

As a newly incorporated business, it’s important to find out if you’re required to register for a GST/HST number. You’ll be assigned a business number when you incorporate, which can be used for registration purposes. To determine if you need to register for a GST/PST account, it’s recommended to check with the Canada Revenue Agency.

If you were operating a business prior to incorporating, you will need to close your old GST/HST number (if you had one) and open a new one under your corporation’s name.

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Step 5: File Annual Returns and Prepare Resolutions

To ensure compliance with the Ontario Business Corporations Act (OBCA) or the Canada Business Corporations Act (CBCA), your corporation must file annual returns with the government and prepare shareholder and director resolutions on a yearly basis for incorporating. These documents are mandatory for your business to remain compliant with the law.


Step 6: Plan Your Business Expenses

After setting up your corporate bank account, you can make payments to your corporation by writing cheques directly. You can also deposit the funds generated by your business directly into your corporate bank account.

It is important to make payments for business expenses through the corporate bank account, and any expenses paid in cash should be tracked and reimbursed by the corporation. The corporation should also reimburse any business-related expenses, such as expenses for business vehicles or home office expenses.


Step 7: Planning Compensation and Tax Strategies for Your Corporation: Salaries, Dividends, and Income Splitting

After incorporating, the individual who previously operated the business as a sole proprietor should begin receiving a monthly salary from the corporation for their services as an employee. If the corporation generates profits, the shareholders may be paid dividends. Additionally, the corporation may opt to pay salaries to family members such as parents, spouses, or children as a form of income splitting. Issuing dividends is often used by corporations as a tax planning strategy.


In Summary

After incorporating your business, it becomes a distinct legal entity and should have its own corporate bank account. The corporation’s first directors need to organize and incorporating the company and assign responsibilities. Maintaining accurate corporate records, filing annual returns, and preparing annual resolutions are also legal requirements. Additionally, the corporation may pay dividends to its shareholders if there is a profit. It’s advisable to seek advice from an accountant or tax lawyer regarding your corporation’s tax issues. If you have any incorporation-related queries, the accountants at Filing Taxes are available to assist you.


What is the meaning of incorporation?

Incorporation refers to the process of transforming a sole proprietorship or general partnership into a formally recognized company by the Canada Revenue Agency (CRA). By incorporating, the owner or owners of the business create a separate legal entity to carry out business transactions.

Is it possible for an individual to form a corporation?

Yes, even if you're the sole proprietor of your business, you can legally incorporate it. You can hold all positions within the corporation and be the only shareholder. However, it's important to note that even though you're a one-person show, you still need to comply with all the rules and regulations that come with incorporation. This includes properly maintaining corporate records, making significant decisions, and filing all the required legal documents.

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