INCORPORATING YOUR BUSINESS
Most businesses operate as incorporated companies for two reasons: limited liability and tax advantages.
A company is a separate legal "person." It can have owners, hire and fire people, buy and sell things, as well as sue and be sued. Except for certain specific situations, a company can do any kind of business that an individual can: hold investments, own property, trade or manufacture goods, and so forth.
There are three kinds of companies in B.C.: those incorporated under the B.C. Company Act (soon to be the B.C. Business Corporations Act); those incorporated under the Canada Business Corporations Act; and foreign companies registered to do business in B.C. We will just focus on companies incorporated under the B.C. Company Act and B.C. Business Corporations Act here.
The key steps in incorporating a company are:
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- Choosing a name
Your company name must be distinctive, describe the business, and have a corporate designation. For example, "Joe's Carpentry Ltd." or "Magna Cosmetics Inc."
- Deciding on a share structure
Preferred shares usually have a set value and pay set dividends. With common shares, you're paid after creditors and preferred shareholders. What sort of share structure do you need?
- Drafting articles of incorporation
These form the "constitution," or legal framework, for the company. The articles of incorporation sets out the name, authorized share capital, and subscribers (who become the first directors and shareholders). The articles set out the rules for the conduct of the company.
- Naming shareholders, directors, and officers
The shareholders are the real owners of the company. They elect the directors, who are in charge of the overall management of the company. The directors appoint officers, who handle the day-to-day management.
- Choosing registered and records offices
Each B.C. company must have an official legal address, called the registered office. Court and other legal documents are delivered there. The records office is where certain records, such as the incorporation certificate, memorandum, and articles, are kept.
Once you've incorporated, you need to file annual reports, naming the company's directors and officers, and its registered office. If you fail to do so for more than two years, the company's registration could be cancelled and its assets forfeited to the government.
Contact Sheena Mitchell to assist you getting your business incorporated.
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