.svg)
Background
There are many advantages to running a business as a corporation, including options to defer and reduce taxes, preserve wealth, and reduce personal liability. A business owner should consider the initial cost for incorporation along with annual maintenance costs, including accounting and legal fees, when deciding whether to incorporate.
This article describes what is involved from a legal perspective in the initial setup.
Business Corporations Act (British Columbia) (BCA)
Incorporations are created under a governing statute. Corporations may be incorporated under the Canada Business Corporations Act (CBCA) or under the statutes of the province or territory where the business operates. BC corporations may be incorporated under the Business Corporations Act (British Columbia).
All CBCA corporations that have their registered office in British Columbia are required to extra- provincially register the corporation in British Columbia, requiring the business owner to file two separate annual reports for the same corporation.
For almost all private corporations in BC, I typically recommend setting up the corporation under the BCA.
Reserving the Name
The first step is to reserve the name. Although this step is generally easy enough to complete on your own, a mistake here could result in undesired extra fees. You can provide up to three names for your corporation for their review, in order of your preference. Alternatively, BC Registries can assign a number to the corporation instead of a name, creating what is commonly called a “numbered corporation,” e.g., “9999999 B.C. Ltd.”.
The names must include a unique term, descriptive term, and a corporate designation such as: Ltd., Inc., or Corp.
All corporate designations have the same legal meaning, which is limited liability corporation.
Example Name: XYZ Holdings Ltd.
XYZ Holdings Ltd.
-must be unique -must be descriptive can be Ltd., Inc., or Corp.
For more information, follow this link: https://www2.gov.bc.ca/gov/content/employment-business/business/managing-a-business/permits-licences/businesses-incorporated-companies/approval-business-name.
Name reservation with BC registries can take from 2-8 weeks, but you can opt for priority registration for an additional fee.
Incorporation Agreement and Articles
The incorporators must sign an agreement to incorporate and must sign to adopt articles of incorporation. Articles govern the corporation, set share classes, and their rights and restrictions, and all acts of the corporation must comply with its articles. Properly drafted articles can maximise tax planning opportunity for your accountant, and help you avoid litigation and other risks in the future.
Shareholders, Directors, and Officers
Shareholders are the owners of the corporation. They own a portion or all of the corporation, measured in shares. The articles of incorporation will determine the classes of shares and the rights and restrictions that apply to the shareholders in that class of shares. Shareholders are often required to personally guarantee major financing for the corporation and will thus be personally liable for any financing they personally guarantee.
Directors, as authorized by the articles, typically govern the corporation. Each director, per the BCA, has signing authority for the corporation. Typically, as set in the articles of incorporation, shareholders appoint the directors. The directors can be held liable for certain acts and liabilities of the corporation, including corporate taxes and up to 2 months unpaid wages of employees.
Officers, although not a position required by the BCA, are often required by banks for paperwork. Officers can have any title, typically President and Secretary, but CEO, Co-President, and other creative titles have occasionally been chosen by the officers. Usually, the directors will serve as the officers, but this is not strictly necessary.
Minute Book
The BCA generally requires that acts of the corporation related to the governance of the corporation be documented in the corporate minute book and that certain portions of the minute book must be made available to the public at an office in British Columbia known as the “registered and records office” (More on this below).
For example, every year the shareholders must appoint or waive the appointment of an auditor, approve or waive annual financial statements, and approve or waive the annual general meeting, and these resolutions of the shareholders must be documented in the corporate minute book.
Other required corporate minute book documents include the transparency register, register of directors, central securities register, directors' and shareholders' resolutions, certificate of incorporation, articles, notice of articles, and shareholder's agreements.
Annual Reports
Annual reports must be filed every year within two months of the anniversary date of the incorporation. Corporations that fail to file annual reports will not be in good standing and maybe dissolved by the BC Corporate Registry.
Registered and Records Office
Technically, the registered office (mailing and delivery) and the records office (where corporate records are kept) are two separate offices that can be in the same place. Under the BCA, a BC corporation must maintain these physical offices in British Columbia, with portions of their corporate minute book open for inspection at least two hours every business day. This is also the address for which service for litigation can be affected by third parties.
What I, Andrew Reed, as a corporate lawyer, can do for you:
1. Help you incorporate your business properly, with all the required documents for your minute book.
2. Advise you on the legal risks specific to your business plan, such as the risks caused by incorporating with multiple shareholders, and how to mitigate those risks.
3. Provide information on other aspects of operating your corporation, such as getting a federal business ID number, dealing with WorkSafe BC, and rules in the BCA that you should be aware of.
4. Keep and update your minute book in digital form, serving as your registered and records office, filing your annual reports, and drafting your annual resolutions.
5. Work with you and your accountant to draft and execute tax planning strategies for your corporation, such as section 85 rollovers of assets, drafting trusts to safeguard your wealth, and helping your corporation, from a legal perspective, develop and adapt as you grow and prosper.
6. Help you with the various contracts, waivers, and other legal protections that your business needs to thrive while minimizing risk.
Please feel free to give me a call at 250-756-3823 or email me at ar@jfblaw.ca; I would be happy to answer your questions about incorporating in British Columbia.
