Now that you have incorporated, what happens next? What must your business do after your articles of incorporation have been filed with the government and you have received a corporation number?
There are some important steps to take after incorporation is complete. Post-incorporation requirements include but are not limited to:
1. Corporate organization – create your corporate by-laws and a shareholder agreement
A shareholders agreement is an agreement used to set the conditions for management of the business when more than one shareholder of a company exists. It is often used to supplement the governing legislation, in the case of Ontario, the Business Corporations Act. A shareholder agreement is not mandatory but is recommended. The main objective of a shareholder agreement is to prepare shareholders, at the start of their business relationship, by outlining what each shareholder’s responsibility is under various circumstances that may arise in the life of the business. Typically the following topics are addressed:
- contributions and responsibilities of the shareholders;
- deadlock resolutions;
- lockdown resolutions;
- dispute resolutions;
- the effect of certain unforeseen events, such as death of a shareholder;
- liquidity creation for unmarketable shares;
- preventing shareholders from competing with the corporation or sharing of confidential information.
All shareholders must sign a resolution accepting the agreement.
All corporations also need to adopt by-laws, which set out the basic outline for the corporation’s governance. By-laws are operating rules and they include how officers are selected, how meetings are run, the duties and obligations of directors and officers, how the organization operates and basically all the relevant information that outlines for the organization what it is supposed to do in order to carry on business. Typically both By-law 1 and By-law 2 are adopted by a corporation:
- By-law 1 — a by-law generally relating to the conduct of the business and affairs of the corporation.
- By-law 2 — a by-law respecting the borrowing of money and the issuing of securities by the corporation.
By-laws are to be approved by the shareholders and directors of the corporation.
2. Corporate organization – shareholders, directors, and officers
Pursuant to the Ontario Business Corporations Act, all standard, for-profit corporations have shareholders, directors and officers. Large corporations are typically managed by its Board of Directors and day to day operations are overseen by its officers.
Every corporation must have at least one shareholder. The Articles of Incorporation will determine the number and class of shares that the corporation may issue along with:
- any restrictions;
- the right to vote at shareholder meetings;
- the right to receive a dividend when declared by the directors, and;
- the right to share in the allocation of the corporation’s assets in case of dissolution.
The shares are issued via the share certificate, a legal document that certifies ownership of a specific number of shares in a corporation. The names and address of shareholders along with the class and number of shares are recorded in a Shareholders Register. Any transfers of shares including transferor and transferee information are recorded in a Share Transfer Register. Tracking shares issuance is achieved via a shareholders’ ledger. Shareholders are required to hold an initial organizational meeting in which they will determine the number of directors and appoint them, confirm the by-laws, appoint the auditor and approve, ratify and confirm all the decisions made and measures taken by the Board of Directors of the Corporation. Resolutions are used to institute all of the above actions.
Directors are appointed by the shareholders by an ordinary resolution at a general meeting. The names, addresses, and election dates are recorded in a Directors’ Register. Directors must hold and document an initial meeting of directors, also called the organizational meeting. The purpose of this meeting is to confirm that all corporate records required to be prepared and maintained by the corporation are kept in a book designated as “The Minute Book”. The Corporation’s articles of Incorporation, endorsed with a certificate, are placed in the minute book. Directors will approve the location of the minute book, the registered office address, the forms of shares, the shares issued, the adoption of registers and the adoption of a corporate seal. They will designate and appoint the officers, approve by-laws and financial year-end, create corporate bank accounts and appoint or waive the appointment of an accountant. Similarly, resolutions are used to institute all of the above actions.
Officers are responsible for the day-to-day operations. The names, position held, and election dates are recorded in an Officers’ Register. A “general notice of interest” resolution must be signed by officers to make their positions valid.
3. Corporate filings – Form 1: Initial Return/Notice of Change
Pursuant to the Ontario Business Corporations Act, an Initial Return must be filed with the Ministry of Government Services within 60 days of incorporation, or, as a Notice of Change, within 15 days after the change(s) take place. This filing will allow you to:
- set out the registered and mailing office address;
- appoint, change or remove officers and directors of the corporation;
- change the registered and mailing address of the corporation.
All information pertaining to directors and the five most senior officers of the corporation must be reported. Once filed with the Ministry of Government Services, the initial return will form part of the minute book.
4. Corporate filings – Form 2 under the Business Names Act
Pursuant to the Ontario Business Names Act, if you would like to use any name other than your corporation name you must register a trade name. A trade name is any name different than your corporation name for which you carry on business. It’s important to recognize that a trade name is not a trademark. Some basic principles to keep in mind when registering a business name:
- business names registered under the Business Names Act are “not protected” from use by other entities. Anyone else can use the exact same name to register a completely different business;
- there is no limit on the number of business names that can be registered for each corporation;
- business names expire every five years and must be renewed.
If you choose to file a business name registration, the Ministry of Government Services will provide a Master Business License as proof of registration. The Master Business License will also form part of the minute book. Also keep in mind that if a business name is adopted, you may have to list the corporate name together with the business name(s) in legal contracts or documents. Eg. ABC Group Inc. carrying on business as ABC Dry Cleaners.
5. Corporate filings – extra-Provincial registrations
Pursuant to the Extra-Provincial Corporations Act, if you would like to conduct business in any other province or territory, you must register extra-provincially in the province in which you will be doing business. The extra-provincial registration process varies per province in terms of the necessary steps to take as well as the fees that may apply.
In order to register the company in other provinces successfully, you need to order a NUANS name search report or provincial name search report (depending on specific requirement in each province) in order to determine the availability of the company name in that province. Keep in mind thought that it is possible that your corporation name already exists in other provinces, unless federally incorporated.
Registering your business extra-provincially will allow you to carry on the following activities in that jurisdiction:
- hire employees;
- have facilities or offices;
- open up bank accounts.
If the extra-provincial registrations are domestic (within Canada), you are not required to file annual returns in the extra-provincial provinces, filing the annual return for your home province will suffice.
The filed extra-provincial registration(s) will also form part of the minute book you are required to maintain for your corporation.
6. Corporation supplies
Legal corporate supplies are purchased for every new company that is incorporated. Once a certificate of incorporation is received, the company shareholders are required by law to keep an up-to-date minute book (containing your formal corporate documentation) usually at the corporation’s registered head office.
A minute book typically consists of letter or legal sized pages containing a specific set of indexes designed to organize, record and store all pertinent corporate records and information. The documents in a minute book typically include Articles of Incorporation, registers of directors & officers, securities documents, bylaws, minutes of meetings and copies of government filings.
Typically, the minute book will have some sort of identifier, whether it’s a name plate or lettering embossed right on the cover or spine that will identify the corporation.
Along with your minute book, if you have adopted a corporate seal you will need to purchase an embossing seal, which is used to emboss the corporations name on any legal documents.
Standard minute books often include the purchase of precedent bylaws, a set of documents that will help you set out how the corporation will govern itself, organizational resolutions, necessary for organizing your corporation and share certificates according to the share structure set out in the incorporating documents.
Corporate supplies may be ordered individually or as part of a package, either with the incorporation/company formation process or separately. If at any time your corporation changes its legal name, you will be required to purchase a new corporate embosser highlighting the new company name.
7. Annual requirements
Once the company formation has taken place, there are Annual Upkeep/Compliance requirements that are necessary to ensure the company remains in good standing with the Ministry of Government Services. A company must hold an annual shareholders’ meeting no later than 6 months after the company’s year-end.
All Ontario and Foreign Corporations with a licence in Ontario under the Extra-Provincial Corporations Act are required to file an Annual Return. Annual Return Filings are mandatory. They are required to ensure that all corporate information on the Ministry of Government Service corporate public record is up-to-date. You will be required to verify address information and officers and directors information on these returns.
Annual corporate documentation that needs to be prepared includes:
- annual review document;
- annual return filing;
- annual minutes and applicable resolutions;
- monitoring report of any business names and partnerships for renewal, and;
- all applicable agent filings and/or agent for service documents, if necessary.
At the annual meeting, the appointments of directors, officers and the auditor are discussed and approved. The company’s financial statements are also acknowledged and approved.
8. Organizational changes
In addition to company formation and annual requirements, there are organizational changes that may take place throughout the life of a corporation. Things such as:
- corporation name change;
- change in share structure;
- change in officers, directors or head office address;
- an amalgamation, continuance to another jurisdiction or dissolution;
- addition/removal of extra-provincial registration and trade names, and;
- share transfers and so on.
These changes, supported by various forms and requirement documents, may require amendments to government filings, corporate resolutions, shareholders, directors and officers registers and shareholders’ ledgers.
9. Business licenses and permits
Depending on the type of business and industry you are in, or the location/municipality, your business may require various licences and permits from different levels of government. You will be required to obtain all required licences and permits in order to provide day-to-day services. You may contact the appropriate government office, or the municipal or regional offices to find out if your business requires any special licensing. If you industry has an association or support group, they often will have information relating to any special requirements for you business.
10. Government tax accounts
Upon incorporation, the Ministry of Government Services will automatically send the information to the Canada Revenue Agency in order for you to obtain your Business Number (BN). A business number is a 9-digit number assigned by the federal government to allow your business to register accounts with the Canada Revenue Agency, such as an HST account, Payroll account, Import/Export Account, WSIB Account.
- HST Account — most companies with taxable sales of more than $30,000 over any four or fewer consecutive calendar quarters, must register for and collect the Harmonized Sales Tax (HST) in Ontario. All taxi and limousine operators must register for HST regardless of their revenues.
- Payroll Account — you must apply if you will have employees and are paying salaries and/or wages.
- Import/Export Account — If you import goods into Canada or export goods to other countries, you should register.
- WSIB Account – to provide workplace insurance coverage for all employees where applicable.