5 things to do after incorporating your business
1. OPEN A CORPORATE BANK ACCOUNT
Your business is now incorporated and you are ready for business. Your corporation is a distinct legal entity, separate and apart from you. It can sue and be sued, it can own assets, transact business and it therefore needs a bank account, separate from your personal account. To open your corporate bank account, banks may request the corporations’ certificate and articles of incorporation and you may need to fill out some bank forms.
2. ORGANIZE YOUR CORPORATION
Organizing your corporation means putting a structure to it and assigning responsibilities within the corporation. After incorporation, the incorporators or first directors need to call the first meeting of directors to organize the corporation or alternatively sign organizing resolutions approving and adopting organizational resolutions. At the first meeting of directors or through corporate resolutions, the corporation will:
a) Issue shares from the authorized share capital of the corporation. SME’s may start with the incorporator being the sole shareholder. As a legal proof of share ownership, the corporation will create and issue share certificates for each of the shareholders of the corporation. Share certificates show the class and number of shares held by shareholders. If you have more than one shareholder within the corporation, prepare a Shareholders Agreement. Read our article on How a Shareholders’ Agreement Can Save Your Business here.
b) Appoint Directors: The shareholders appoint directors to oversee the activities of the corporation. Again, the sole shareholder may be appointed as the sole director.
c) Appoint Officers: The directors of your corporation appoint the officers – President, Secretary, and Treasurer.
d) Create Registers and Ledgers: The corporate register is a list of your corporation’s shareholders, directors, and officers. The shareholders’ ledgers show the class and number of shares held by each shareholder of the corporation.
e) Appoint an Accountant for your corporation
f) Minute Book: Keep all corporate records in a minute book. You will keep records of corporate documents such as your corporation’s:
- Certificate of Incorporation
- Articles of Incorporation
- General Corporate Bylaws
- Banking Bylaws
- Minutes of company meetings, agreements and resolutions
- Copies of initial returns and forms filed with the Ministry
- Ledgers and Registers
- Share Certificates
You are required to keep your corporate records up-to-date and in compliance with the law. Your minute book should be well-organized and kept by a professional.
3. ANNUAL RETURN AND RESOLUTIONS
The law requires each corporation to file annual returns with the government and prepare shareholder and director resolutions on a yearly basis. These documents are mandatory in order for your business to be compliant with the provisions of the Ontario Business Corporations Act (OBCA) and Canada Business Corporations Act (CBCA).
4. PLAN YOUR BUSINESS EXPENSES
With the establishment of your business account post-incorporation, you can make cheques payable to your corporation. Funds generated after incorporation can be deposited directly into your corporate bank account. Payments for business expenses should be made through the corporate bank account, and business expenses paid by cash should be tracked and reimbursed by the corporation. The corporation should reimburse business vehicles and home office expenses.
5. PLAN SALARIES, DIVIDENDS AND INCOME SPLITTING
Salaries: After incorporation, the former sole proprietor who personally operated the business becomes an employee of the corporation and should start receiving a monthly salary from the corporation for the services provided.
Dividends: If the corporation makes a profit, the shareholders of the corporation may be paid dividends.
Income Splitting: The corporation may pay salaries to family members including parents, spouses or children.
Issuing dividends is a tax planning tool used by corporations.
Upon incorporation, your corporation becomes a legal entity, separate from you and should own its own corporate bank account. The first directors are required to have a meeting where they organize the corporation and assign responsibilities. The corporation is required to maintain updated corporate records in a corporate minute book, file annual returns and prepare annual resolutions. The corporation may pay dividends to its shareholders when profit is made.
For more information and business support after incorporation, contact a member of Rabideau Law Business Law Practice Group here.
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The blog published by Rabideau Law is intended as general information only and does not serve as legal advice. By viewing the blog posts, the reader understands there is no solicitor-client relationship established. Readers are urged to consult the business and corporate lawyers at Rabideau Law on business related concerns.