Incorporations are not a DIY Project

Business beautiful woman writing in business notebook using smartphone

It is fairly easy to register a name reservation or incorporation with BC Registry Services. Is this something businesses that want to incorporate should be doing on their own?

 The online registration services are very, very misleading. They supply the basic forms for a business to register the incorporation with the BC Company Registry, however, they do not provide any of the documents or processes for the registered incorporation to operate as a company.

They literally just register it and spit out an incorporation number – they don’t actually set up the corporation at all. An incorporated company is far more complicated than just having an incorporation number – that is just one basic step with the BC Registry.

An incorporated company is a legal entity on its own and can do everything a person can do except vote. A corporation can earn money, pay taxes, buy property, take out loans and mortgages and give loans and mortgages. As you can imagine, there are a lot of background steps that need to be in place to do all of that successfully. Companies also have to deal with CRA, banks, customers, suppliers, and several government agencies. 

The online registration service doesn’t set up anything they need to deal with any of that and often companies that incorporate themselves don’t find that out until they are already in trouble.


What can happen if they go online and register incorrectly?

The first thing that is often overlooked or registered incorrectly is the articles of incorporation. This is all of the rights and restrictions of what a company can and can’t do depending on the share structure, it is literally the operating manual of the company. For example, if a company wants to borrow money or lease a property or vehicle, the articles of incorporation have to say the company can do that. The second thing that is often registered incorrectly is a share structure. If there are no shares that allow the company to pay dividends to shareholders, how will the owner declare its income come tax time? The third thing is issuing shares and paying for the shares themselves. There is no function to do this on the online registration, and how can a company operate without shareholders. You can’t be a shareholder unless you are issued shares. 

Without these three things done correctly, a company cannot operate correctly and so come tax time or when a company owner goes to open a bank account, borrow money or lease a vehicle, they won’t be able to. Then they have to go back and fix the company setup, and modifying a share structure is a formal process that is expensive and it takes time. I feel really awful for clients who spent all this money on an online platform that really didn’t do anything for them that they needed it to do and now we have to fix it so they can file their taxes, lease a company vehicle or take out a mortgage.


Is there a cost difference between registering online themselves and hiring a Corporate lawyer to do it?

A corporate lawyer will charge legal fees to set up the articles, issue the shares and prepare the corporate record book. They will also advise the new company owner about all the steps they need to take to operate, usually in conjunction with the company’s accountant. This is money well spent, and the cost is usually about $1000 for the legal fees so very reasonable as compared to the very important reason you are doing this – setting up a corporation.

It will be well more than double the legal fees and time spent for the corporate lawyer to fix the company that was registered incorrectly. The incorporating company still pays the same registration costs for the BC Company Registry, that doesn’t change, but the lawyer will do the registration step for them and input the correct share structure and articles of incorporation so the company can now do what it was intended to do.


Are there added benefits to hiring a lawyer to incorporate a Company?

So many! Every company is unique, for example, an electrical contractor has different corporate needs than a realtor or a dentist. Their articles of incorporation need to be able to accommodate the needs of the company to operate. 

Every business owner is unique, some companies will be family run and some will have employees. The company share structure has to allow for the profits to flow through the shareholders in the most tax advantageous way possible. Also, the government has introduced several new layers of transparency disclosure for company ownership. There are massive fines for company directors and shareholders who do not file the documents they are required to under this legislation.

Also, every year there are resolutions and annual reporting requirements and this is often overlooked and causes the Company to become struck off the Registry. It is really expensive, inconvenient, and time-consuming to reconstitute a company. As well, the corporate record book has to be maintained, up to date and available for inspection every business day during certain hours according to the company regulations. Lawyers do this service for a very low annual fee, usually just a few hundred dollars.

Finally, a lawyer can help you liaise with the banks, lenders, landlords, or whoever needs copies of your corporate records to proceed with the business of the company. It is much easier than trying to sort out what they need from all the paperwork. We do this all day and know exactly what needs to be sent. In the end, it is far less expensive to seek the proper advice and have the job done right.


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