Forming a business in British Columbia can be accomplished in one of three ways. The first is to file for a sole proprietorship, the model used by the majority of small business owners, the second is to form a partnership and the third—the model to be discussed here in more detail—is to form a corporation.
In British Columbia businesses are incorporated according to the rules and provisions of the Business Corporations Act. Once a business is granted corporate status, not only will they acquire the ability to go public—to sell stock in the company—there business will also take on all the powers of an individual, or an independent existence apart from their shareholders. What this means is that the act of incorporation gives life to a completely new legal entity—the corporation (also known as a company)—and that company can now acquire assets, go into debt, enter into contracts and sue—as well as be sued.
The registration process and upkeep for businesses seeking incorporation in British Columbia can be much more expensive than it would be for a sole proprietorship or partnership. Not only are startup costs higher, for fees ranging from legal to accounting services, corporations are also required to complete more annual filings to the Corporate Registry. For example, each corporation in British Columbia is required to file (and pay for that filing) an annual corporation report and to inform the Corporate Registry of any changes in the company’s, or its members, addresses.
Persons wishing to incorporate their business in British Columbia must follow four mandatory steps. These are:
- Reserve the corporation name with the Corporate Registry
- Enter into an incorporation agreement
- Establish the corporation’s articles; and
- File an Incorporation Application with the Corporate Registry
Step One: Reserving the Corporation Name
Once a company decides to incorporate, the name of that business must be approved by the Corporate Registry. This is to ensure that first, the name being chosen is not the same as—or so similar that it may lead to confusion—that of another company doing business in British Columbia, and second, to ensure the name meets the established guidelines of the Corporate Registry.
To reserve a corporation name, businesses must complete a Name Approval Application and list their top three name choices in order of descending preference. Once the application is filed, the applicant will have 56 days to complete the other steps in the incorporation process. Failure to do so will result in a null and void application and the process will have to be restarted.
Name Approval Applications can be completed online at the Corporate Registry website (www.corporateonline.gov.bc.ca) and there is an electronic filing fee of $30.
Step Two: Entering into an Incorporation Agreement
Prior to forming a corporation in British Columbia, the incorporators—even if it’s a lone individual—must sign an incorporation agreement. This agreement must contain all of the following:
- A written statement of agreement that each incorporator of the company will take at least one share of the new corporation.
- The full name of each incorporator, their signature(s) and the date each signed the agreement.
- The number of shares in each class being taken by each incorporator.
This incorporation agreement must be maintained by the corporation and kept on file as part of the company’s permanent record.
Step Three: Establish the Corporation’s Articles
Every business wishing to incorporate in British Columbia must first establish articles of incorporation. In essence, these articles are a set of rules or conduct guidelines which must be followed by the company’s incorporators, employees, directors and shareholders. The information that must be included in these articles of incorporation can be found in detail on the Corporate Registry website, and contains information such as how and when company financial information will be shared, how often Directors’ and shareholders’ meetings will be held and how employees will be evaluated.
Step Four: File an Incorporation Application
The final step to forming a corporation in British Columbia is the filing of an Incorporation Application. This application, which will ask basic questions such as the names, addresses and other demographic information of each person applying, and other information regarding the business in question, can be filed electronically at the Corporate Registry website. It is recommended, however, that filers initially complete a paper version of the application, first as a permanent record of their filing, and second, to assist them in filling out their electronic application.
The cost for filing an Incorporation Application is $350 dollars.
Once incorporators have completed the four steps towards forming a corporation, it is required that they keep any and all documents permanently on file. Also, before even beginning the incorporation process, it is “always”, according to the Corporate Registry, “wise and recommended to seek the legal and tax advice of a corporate accountant and an accounting specialist respectively.”
Annual Corporate Income Returns (T2 Income tax return)
Of course once you have incorporated your business you will be required to file T2 corporate income tax returns on an annual basis. With proper tax planning you will be able to legally reduce your overall tax bill every year. Give me a call today to discuss your particular tax situation and we can devise a plan to help you minimize your overall tax bill each year. I can be reached by email at firstname.lastname@example.org or by phone at 250-661-9417.