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Ontario Incorporation Overview |
Ontario
Incorporation in a Nutshell
- Incorporation creates a new legal entity in the eyes of the
law.
- The main advantages of incorporation are
limited personal liability and the potential tax advantages.
- A company can be incorporated either federally or provincially.
This site covers an Ontario provincial incorporation. Please
click here for more information on federal
incorporation.
- The 'owners' of the corporation are its shareholders.
- A majority of directors of
the corporation must be 'resident Canadians'.
- It is the responsibility of the applicant, not
the government, to ensure that the corporate
name is registrable,
and not confusing with the name of any similar business.
- Government approval of your incorporation does not protect
your corporate name.
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Methods of Carrying on Business
In starting a new business,
one of the first decisions you must make is what type of
business
you
wish
to set up.
There
are many options available, including incorporation, partnership
and sole proprietorship. Please note that the laws governing
such matters depend on the jurisdiction -- whether it is
federal or provincial, and which province.
The most common forms of business organization are:
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Sole Proprietorship: This is basically a non-incorporated business
with a sole owner.
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Partnership: The Ontario Partnership Act defines a
partnership as the relationship between persons who
are carrying
on
business in common with a view to profit. It is NOT a
legally separate entity from its partners. A partnership
can be either General or Limited.
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Corporation: A corporation
is a separate legal entity in law from its owners. It can sue and be sued in
its own name. Each jurisdiction in
Canada
(the
ten provinces, the territories and Canada) has its own rules for incorporation.
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| Non-profits,
Co-ops and Others : These are more specialized
forms of business organizations. |
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Private vs. Public Corporations
A fundamental distinction
can be made between what are called 'private' or 'closely-held'
corporations and 'public' corporations. In general, a public corporation
offers its shares to the public, either through the stock market
or privately. In order to protect the public, the government has
imposed special rules, notably about disclosure, on these corporations.
These rules are complex and require much paperwork and effort.
As a result, most small businesses incorporate as 'private' companies
that do not offer shares to the public. Three common restrictions
are added to the Articles of Incorporation to ensure that securities
legislation does not apply. First of all, the number of shareholders
(excluding employees) is limited to 50 or fewer. Secondly, shares
cannot be offered to the public. And finally, restrictions are
placed on the transfer of shares.
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