In Part 1 of this blog series, we discussed what it means to incorporate and the potential benefits of incorporating a business. Incorporating also comes with one-time and recurring legal obligations, some of which require money, time, and attention, such as (a) filing annual income tax returns; (b) filing annual information returns; (c) registering a federal corporation to operate in a province or territory; (d) registering a provincial corporation to expand its operations into another province; (e) maintaining corporate records; (f) holding annual meetings or signing annual resolutions; and (g) obtaining HST numbers, permits, and licences, if applicable.
Income Tax Returns
Every corporation must file an annual income tax return with the Canada Revenue Agency no later than six months after its fiscal year-end. A corporate accountant can assist you with filing your annual tax return on time.
Every corporation must file an initial information return within 60 days of incorporation and an annual information return listing the names and addresses of its directors and officers, the corporation’s registered office address, and its fiscal year-end. Ontario returns must be filed with the Ministry of Government and Consumer Services, through the Ontario Business Registry, within six months of the corporation’s fiscal year-end. Federal returns must be filed with Corporations Canada, through the government of Canada website or by mail or by email, within 60 days of the anniversary of incorporation. There is no fee to file this information return. If a corporation fails to file an initial or annual information return, the government may dissolve the corporation.
Registering a federal corporation to operate in a province/territory
Provincial legislation requires federally incorporated companies to register in each province and territory in which it will conduct business. When a business incorporates federally, it can, at the same time, register to operate in certain provinces, including Ontario, by filing an initial information return with the Ministry of Government and Consumer Services. If the corporation plans to commence business in Ontario at a later date, the corporation must file the initial return within 60 days of commencing business in Ontario. There is no fee to file this information return.
If a provincially incorporated business in Canada wishes to conduct business in another province or territory, it must register with that new jurisdiction to do so. For example, if a business that was incorporated in British Columbia wishes to operate in Ontario, it must file an initial information return with the Ministry of Government and Consumer Services within 60 days of the date the corporation begins to carry on business in Ontario. There is no fee to file this information return.
Corporations are required to keep their corporate records organized and up to date. Most corporations store their records, such as articles of incorporation, by-laws, ledgers and registers, resolutions, consents and resignations of directors and officers, share subscriptions and certificates, and copies of agreements, in a corporate minute book. If instructed, a business lawyer can order your minute book and can prepare and keep your corporate records up to date.
Annual Meetings and Resolutions
Shareholders and directors of Ontario and federal corporations must hold annual meetings or sign annual resolutions within 18 months of incorporation and within every 15 months thereafter (no longer than six months after each financial year-end). During annual meetings or through annual resolutions, shareholders and directors must approve the corporation’s financial statements for the previous year; elect the directors, appoint the officers, and appoint an accountant for the ensuing year; and declare any bonuses and dividends. Corporations that do not publicly trade their shares, may also waive the requirement to appoint an auditor at this time.
HST Numbers, Permits, and Licences
A corporation that brings in $30,000.00 or more in total revenue in one year must register for an HST account. Corporations must also apply for and obtain all relevant permits and licences prior to engaging in business activities.
Conclusion and next steps
Understanding both the benefits of having a corporation and its ongoing costs and obligations are important pieces to incorporating with confidence. In addition, business owners should consider other issues, such as their existing and future relationships with third parties and fellow shareholders and the life of their corporations after their death. In our next blog, Part 3, we will discuss these and other important considerations before incorporating.