There may come a time for you as a small business owner or sole proprietor when your accountant advises you that it is an appropriate time to incorporate your small business. Then you may be asking yourself, how do you incorporate your company?
Usually, this is the next stage when a small business grows to a certain size, requires liability protection, or has a certain amount of retained earnings.
Incorporation is one of the biggest steps a business owner can take, so it is important to correct the structure. Revising a corporate structure after incorporation is costly and time-consuming.
There are certainly resources out there to reserve a name or get an incorporation number with the BC Registry, but that is not all it takes to be ‘incorporated.’ That is just the government agency registration requirement.
“Incorporation” also involves (at minimum) establishing an appropriate share structure for your company that will serve its purposes now and into the future, allotting or issuing shares and meeting the purchase requirements, establishing the articles of incorporation, and ensuring each share class has appropriate rights and restrictions to qualify for the tax advantages and business planning that required incorporation in the first place, creating and maintaining the minute book and producing the required resolutions and registers.
Lawyers and accountants work together during incorporation and throughout the year to ensure the company is properly established and meets the requirements of all important relationships the company will have – with lenders, CRA, insurance companies, bankers, landlords, suppliers, registries, and the courts. With the proper structure, your company will be ready for expansion when you are and will protect what you have worked so hard to build.
When the time comes to acquire future assets, take on investors or partners, buy other businesses or equipment for growth or sell or pass the company to other family members, the process will depend on what framework was established when the Company was first created. If it is not done properly initially, an incorrectly incorporated company will hold up the growth or the sale and cause expensive delays while the company structure is altered to meet the future needs. It could delay contracts, loans, purchases and create difficulty with the CRA.
A little advice and planning go a long way – incorporating is an important step that needs to be done right. You get the quality of services you pay for – why not have the peace of mind that all you have worked hard for was correctly set up and maintained? Doing the incorporation yourself is not worth the risk and the cost when time is of the essence to hire professionals (usually on a rush basis) to fix mistakes and redo what could have been done fairly inexpensively at the beginning and with regular maintenance.
If you have questions and would like a consultation, or for more information, please contact Priddle Law Group at (250) 434-8911 or email reception@priddlelaw.ca to make an appointment.
