I always get excited when a person comes in to incorporate a company. It’s the start of a very exciting period of a business’ life and one that it is fun to be a part of. There are so many aspects to changing from doing business by yourself (a sole proprietor) to becoming a corporation.
When a person or a business decides to incorporate another entity is created. I describe the corporation to my clients as a totally different “being”, and like any addition there are extra roles and responsibilities associated with incorporation.
The basic steps of incorporation are done by filing a number of documents with the Registrar of Companies in Victoria. In our age of technology a lot of that can be done online, so the actual incorporation can take place within a day. However there are some other things that need to be in place before completing the incorporation:
1. Most people don’t know this, but you cannot automatically use whatever name you want for your company and incorporate. The default name in a company incorporation is the incorporation number of the company followed by the words “B.C. Ltd”. If you have a name for the company that you are heart set on using, you need to get approval to use that name. This requires obtaining a name approval from the registry which can take a couple of days. This needs to be done before you incorporate. It’s a simple process that we can complete for you.
2. You also need to think about the share structure (who will own the company and in what percentage) and the directors of the company (who will be responsible for the company). A company in British Columbia must have outstanding shares and at least one director. It is no longer required that a company have officers, like a secretary.
3. Once you have decided on all of the above, you need to think about the rules that are going to govern the company (these are called the company’s Articles). The registrar provides a standard form articles (called Table A articles) however if you want any specific rules attached to the shares, you need to come up with a specific set of Articles. A company’s articles consist of 20 plus pages and deal with all sorts of rules that govern how the company will run. Generally, if we are incorporating a company, we also create their articles for them.
4. Once all of that is done, you incorporate with the Registrar.
Now you have a company! Yay! However you are only halfway there at this point …
1. Since the company is an entity in itself – it needs to approve all of the things that we have just discussed and put them into place. This requires a series of resolutions by the shareholders and the directors.
2. Once we have a nice big pile of paperwork, those documents go into the company minute book – which is basically a binder of all of the legal paperwork that will be generated by the Company now that it is in existence.
3. Also, your bank will want a pile of documents related to the incorporation in order to set up your business account – we can generate that package for you.
Any company in British Columbia is required to comply with the Business Corporations Act (the “BCA”). There are some general “housekeeping” requirements in the BCA that a company needs to meet and that it is helpful to have a lawyer for.
1. The first is that a company has to have a Registered and Records Office. This is a place that is open during business hours on Monday to Friday where any member of the public can go and look at parts of the company minute book. Now, this doesn’t usually happen except when a business is being bought or CRA is doing an audit – however it is a requirement of the CBA. Since most business owners are busy running their business, it is beneficial to have a third party make sure that they have the minute books in case someone wants to look at them. We act as the Registered and Records office for most of our clients, because we have already created the minute book, we are always open during regular business hours and we also know what documents should be made available to what people.
2. As well, you need to file documents each year with the Registrar to confirm that the business is still open. We contact our clients when these Annual Reports are due and file them for the clients.
3. Finally, you will have other things come up during the year, like taxes and reporting dividends etc. We can often take instructions from your accountants on preparing resolutions to “paper” the financial decisions that the business has made.