how to decide

Incorporation vs DBA vs Partnership vs Non-profit – Help me choose

Consider 3 Questions Before Registering Your Business or Organization:

legal structure

Choose Your Legal Structure

When starting a business or an organization, the first decision you need to make is to choose its legal structure. This legal structure will have an impact on:

The personal liability you will have from the debts of the business

The amount of paperwork and compliance your business will be required to do going forward

Your ability to raise investment capital for your new business

Level of control in managing and making decisions for your business

The level of taxes you will potentially pay

Three Main Ways To Structure Your Business

Corporations

A corporation is a legal structure that is formed to operate a for-profit business that has a legal personality which is distinct from its owners (called shareholders) and the individuals who manage and run its affairs and business (called directors and officers). The creation of a corporation occurs following the proper filing of Articles of Incorporation with the government.

The principal advantages of a corporation are that it can exist for an indefinite period, beyond the lifetime of any one member or founder, and it also offers its owners the protection of limited personal liability. It also offers the most ownership flexibility which makes its easier to raise capital from investors. Some of its drawbacks include the higher costs of starting and operating a corporation due more compliance requirements (i.e. more government filings and paperwork).

Overall corporations are the preferred legal structure for businesses.

Start your corporation

Sole Proprietorships (DBAs)

A sole proprietorship is owned by one individual and the business does not exist apart from the owner. It’s easy and quick to form, gives you complete business-making decision control, allows you to earn all the profits but you are also personally liable for all debts and obligations related to the business

Start your Sole Proprietorships

Partnerships

A partnership is created when two or more people agree to share in the profit and losses of a business. It’s like a sole proprietorship but with 2 or more owners. A primary advantage is that the partnership is that profits or losses are "passed through" to partners to report on their individual income tax returns. A primary disadvantage is liability-each partner is personally liable for the financial obligations of the business.

Start your Partnerships

Non-Profits

Non-profits are associations and organizations that are formed by individuals in order to pursue a common goal, and are often dedicated to advocating for a specific group or furthering a specific social cause operating for the benefit of others. In other words, its objective is not to make money for its owners or members. A non-profit organization uses its surplus revenues to further achieve its purpose or mission, rather than distributing its surplus income to the organization's members as profit.

It’s important to note that a non-profit organization needs to apply with the Canada Revenue Agency to qualify as a charity to be able to issue tax deductible receipts.

Start your Non-profits

To see a Legal Structure Comparison Matrix click here.

jurisdiction

Choose Your Jurisdiction

If you’ve decided on a sole proprietorship or partnership, you simply register in the province you are located in. If you have decided on a corporation, you need to choose between a provincial or federal corporation. There are advantages and disadvantages to both and there is no one best solution. Deciding which jurisdiction to choose may depend on the answers provided to these questions:

Do you plan on doing business in more than one province?

Do I want to have 2 annual corporate reports (one for federal and one for provincial)?

What percentage of the corporation's directors will be residents of Canada, if any?

Do I want to save money now for incorporation, even though it may cost me more in the long run?

The Most Common Factors That Are Used To Decide Where To Incorporate

To see a Legal Structure Comparison Matrix click here.

One of the most important factors for small businesses when deciding to incorporate is the cost of incorporation.

The short answer is that most often its simpler and less expensive to incorporate a provincial corporation in the province your business will be operating in.

The jurisdiction of incorporation will automatically become criteria for decision because government fees are not the same. Below are the current government incorporation filing fees Canadian jurisdictions:

Jurisdiction	Government Fees
Federal	$200
Alberta	$450
British Columbia	$352
Manitoba	$300
New Brunswick	$312
Newfoundland	$300
Nova Scotia	$417
Ontario	$300
Prince Edward Island	$265
Quebec	$389
Saskatchewan	$265

Moreover, if you are incorporating a federal corporation, you must also register extra-provincially. Currently, the provincial fees for a federal corporation which has its registered office in that province are (these are in addition to the federal incorporation fee of $200 indicated above):

Province	Extra-provincial Registration Fee
Alberta	$395
British Columbia	$391 (including name search $39)
Manitoba	$349 (including name search $49)
Newfoundland	$560
New Brunswick	$212
Nova Scotia	$252
Northwest Territories	$300
Ontario	N/A
Prince Edward Island	$260
Quebec	$308
Saskatchewan	$340 (including name search $75)
Yukon Territory	$335

As you can see, in most cases, it is more expensive to incorporate a federal corporation. The one exception is Ontario where there is no provincial registration fee.

Moreover, there are annual filings. With a federal corporation, there would be 2 annual corporate report filings ($20-40 per year). For provincial corporations there would only be 1 annual report.

Another important factor when deciding to incorporate is the time it takes. Some jurisdictions are significantly faster than others. Below are the standard processing delays (in business days) that it takes to obtain a certificate of incorporation following the submission of articles of incorporation. Please note additional delays may be due to name approvals.

Jurisdiction	Standard Processing	Expedited Processing (Additional fees apply)
Federal	5 days	2 days
Alberta	5 days	3 days
British Columbia	10 days	7 days
Manitoba	15 days	6 days
New Brunswick	15 days	N/A
Newfoundland	21 days	N/A
Nova Scotia	21 days	N/A
Ontario	5 days	2 days
Prince Edward Island	15 days	N/A
Quebec *	10 days	3 days
Saskatchewan **	30 days	15 days

* Please be advised that the trade name will be filed at the time of incorporation, however, there is a government processing time of approximately 14 business days before the trade name is officially approved.

 
** Please be advised that the current government delay to obtain a name decision for Saskatchewan is approximately 15 business days. This delay is in addition to the processing times for incorporations and business name registrations.

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Another factor that can be important in deciding where to incorporate is the Canadian residency requirements of each jurisdiction. This is especially relevant to foreigners starting a business in Canada. If these requirements are not satisfied, you cannot incorporate in that jurisdiction.

There are no legal requirements that shareholders be Canadian residents, although there may be tax implications for the shareholder or the corporation if a majority are not Canadian residents – consult with your tax professional.

Below are the director residency requirements for each Canadian jurisdiction:

Jurisdiction	Resident Canadian Requirement
Federal	at least 25% must be resident Canadians
Alberta	None
British Columbia	None
Manitoba	at least 25% must be resident Canadians
Newfoundland	at least 25% must be resident Canadians
New Brunswick	None
Nova Scotia	None
Ontario	None
Prince Edward Island	None
Quebec	None
Saskatchewan	at least 25% must be resident Canadians; at least one director must be ordinarily resident of Saskatchewan

Furthermore, there are other issues that you may consider in selecting where you incorporate your business, namely, determining the advantages and disadvantages of each jurisdiction's corporate laws and tax structure. If you require additional information to make an informed decision as to where to incorporate your business we suggest you contact competent legal and tax professionals and discuss these matters with them.

Business Name

Choose Your Business's Name

The last important decision to make when starting your business is choosing your business name. This name will become the business’ identity around which you will market your business products or services.
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Many people already have a business name in mind when they decide to start a business. However, it’s important that the name is not already being used by another business to avoid confusion with existing businesses. Accordingly, government registries require that the proposed name is searched on the relevant government databases prior to filing a business registration or articles of incorporation application to ensure that the name you want to protect for your business is in fact available for you to use, and that the name is not deceptively similar to a name that is already registered. To ensure name availability, this requires searching the proposed name and other similar variations.

Once you have selected the legal structure and jurisdiction of your business it’s relatively easy to proceed with the searching for the name availability of your business. Name search reports can be done together with your business registration or incorporation order, or can be done beforehand. The final step is to complete the appropriate online application.

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