This is the first module in the Canadian Small Business Course.
In this module, we examine the forms of organization that a business can take in Canada. Well look at proprietorships, partnerships and corporations.
We analyze the advantages and disadvantages of each form, along with the tax filing requirements for each. Also reviewed are the tax planning opportunities that are available under each form. Most importantly, we go over the decision process that you should go through when choosing the proper method.
FUNDAMENTALS OF ACCOUNTANCY, BUSINESS AND MANAGEMENT 1.pptxRoseBantiyan
HISTORY OF ACCOUNTING Accounting started as a simple recording of repetitive exchanges. The history of accounting is often seen as indistinguishable from the history of finance and business. It has evolved in response to various social and economic needs of men over 5,000 years- its origins can be tracked back to the beginning of time.
FUNDAMENTALS OF ACCOUNTANCY, BUSINESS AND MANAGEMENT 1.pptxRoseBantiyan
HISTORY OF ACCOUNTING Accounting started as a simple recording of repetitive exchanges. The history of accounting is often seen as indistinguishable from the history of finance and business. It has evolved in response to various social and economic needs of men over 5,000 years- its origins can be tracked back to the beginning of time.
Several forms of Business Organisations and their functionality, advantages & disadvantages.
Namely Sole Proprietorship, Partnership, Corporations and LLC.
Unit 2 Part 2 (BBA 104: Business Organisation) according to the syllabus of Kanpur University, Kanpur.
This ppt defines business finance, become
familiar with the role of business finance and knowing the important consideration of risks in financial decision making.
Know the relationship of business finance in other disciplines particularly accounting.
Opportunity Seeking In Entrepreneurship, Spotting Business OpportunitiesJorge Saguinsin
This is a lecture for entrepreneurship elective in Ateneo Graduate School in the Philippines, a leading school in MBA education. The presentation has been uploaded at slideshare for the convenience and ease of access of present and former students for the said elective. Since the presentation has been updated, the students get the newest and latest.
The most difficult part in any entrepreneurial venture is determine which business to get into. This is often stymied mostly, by seeming overcrowding and lack of opportunity in the market place. The presentation says that there are many ways to seek for those opportunities.
Although 'Accounting' has been defined by the different scholarly ways, its nature of accounting is essentially described. Conceptually, accounting is an art of recording, classifying summarizing, and interpreting the financial result. It defined as an art because it consists of certain creativity, value judgment, and skill that assist us to attain certain specific goals. The nature of Accounting mainly divided two views of point:
1. Structural viewpoint. 2. Functional viewpoint.
This presentation makes an attempt to help a lay man understand briefly the various forms of business organisations prevalent in the Indian Business world.
Several forms of Business Organisations and their functionality, advantages & disadvantages.
Namely Sole Proprietorship, Partnership, Corporations and LLC.
Unit 2 Part 2 (BBA 104: Business Organisation) according to the syllabus of Kanpur University, Kanpur.
This ppt defines business finance, become
familiar with the role of business finance and knowing the important consideration of risks in financial decision making.
Know the relationship of business finance in other disciplines particularly accounting.
Opportunity Seeking In Entrepreneurship, Spotting Business OpportunitiesJorge Saguinsin
This is a lecture for entrepreneurship elective in Ateneo Graduate School in the Philippines, a leading school in MBA education. The presentation has been uploaded at slideshare for the convenience and ease of access of present and former students for the said elective. Since the presentation has been updated, the students get the newest and latest.
The most difficult part in any entrepreneurial venture is determine which business to get into. This is often stymied mostly, by seeming overcrowding and lack of opportunity in the market place. The presentation says that there are many ways to seek for those opportunities.
Although 'Accounting' has been defined by the different scholarly ways, its nature of accounting is essentially described. Conceptually, accounting is an art of recording, classifying summarizing, and interpreting the financial result. It defined as an art because it consists of certain creativity, value judgment, and skill that assist us to attain certain specific goals. The nature of Accounting mainly divided two views of point:
1. Structural viewpoint. 2. Functional viewpoint.
This presentation makes an attempt to help a lay man understand briefly the various forms of business organisations prevalent in the Indian Business world.
Success of the organization depends on the experience and competence of the officers of the organization. Different forms of organizations are Line, military or scalar organization, functional organization, line and staff organization, committee of organization, project organization, matrix organization and freeform organization.
For more such innovative content on management studies, join WeSchool PGDM-DLP Program: http://bit.ly/ZEcPAc
This is one of presentations from the 2009-2010 Game Industry Start Up Workshop Series. The first workshop topic was "How to Form and Protect Your Business" and it took place on 9/15/09.
Squared. Essential Guide for New Businesses in UKmondayfriday
Before Starting Up
Many people dream of running their own business.
In recent years this has become a reality for some who have been made redundant.
Others may decide to start their own business
in search of independence, to work for themselves
and be rewarded for their efforts financially.
Whatever the reason for considering setting up
in business, a number of challenges exist.
Despite considerable effort and financing which
may be poured into a venture, there is always a
risk of business failure.
Before you start your business, take some time spent to think through your plans as
this will minimise the risk of failure.
Think about the possible downfalls of being
self-employed. Certainty of income, both in
terms of quantity and regularity, disappears,
whilst fixed outgoings, such as mortgage
repayments, remain. Consider the loss of other
company benefits such as life assurance cover,
a company pension, medical insurance, a company
car, regular hours and holidays.
Consider the views of your family and friends.
Their support is essential. It is important they
understand that the administrative and financial
requirements of running a business can be time
consuming and stressful.
Success in business depends on many factors;
most importantly you need to critically review all
aspects of the business proposition before
progressing too far.
For easy reference, we have carved this guide
into 10 parts:
Part 1 | Selecting a Legal Entity for Your
Business
Sole Proprietorship
Partnership
Limited Liability Partnership
Limited Company
Business Structure – The Pros and Cons
Part 2 | Registering with the Tax Authorities
H M Revenue & Customs
H M Revenue & Customs – NI Contributions Office
H M Revenue & Customs - VAT
Tax Calendar
Part 3 | Accounting & Bookkeeping
Accounting Records and Record Keeping
A Word About Accounting Software Systems
Internal Control
Part 4 | Value Added Tax
Registration
Taxable Persons and Supplies
Tax Rates
Input VAT
Penalties
VAT Checklist
Money Laundering Regulations
Part 5 | Payroll Taxes
Helpful Publications
Do You Have Employees?
The Operation of a PAYE Scheme
Real Time Information
Benefits in Kind
Payroll Software
Part 6 | Income Tax and Corporation Tax
Which Accounting Year Should I Choose?
Tax Returns
Companies
Sole Traders / Partnerships
Tax Credits
Child Benefits
Part 7 | Cash Planning and Forecasting
Starting the Analysis
Cash Collections
Disbursements
Part 8 | Obtaining Credit and Financing
Your Business
How Do I Get the Money?
Business Plan
Financing Alternatives
Debt Financing Sources
Equity Financing Sources
Venture Capital Companies
Part 9 | Insurance
Required Policies
Commercial Liability Insurance
Property Insurance
Business Interruption
Fidelity Guarantee
Directors & Officers Liability
Key Person Protection
Identifying a Key Person
When is Key Person Protection Needed?
Partnership Protection
Shareholder Protection
Fee Pro
Taurus Zodiac Sign_ Personality Traits and Sign Dates.pptxmy Pandit
Explore the world of the Taurus zodiac sign. Learn about their stability, determination, and appreciation for beauty. Discover how Taureans' grounded nature and hardworking mindset define their unique personality.
Enterprise Excellence is Inclusive Excellence.pdfKaiNexus
Enterprise excellence and inclusive excellence are closely linked, and real-world challenges have shown that both are essential to the success of any organization. To achieve enterprise excellence, organizations must focus on improving their operations and processes while creating an inclusive environment that engages everyone. In this interactive session, the facilitator will highlight commonly established business practices and how they limit our ability to engage everyone every day. More importantly, though, participants will likely gain increased awareness of what we can do differently to maximize enterprise excellence through deliberate inclusion.
What is Enterprise Excellence?
Enterprise Excellence is a holistic approach that's aimed at achieving world-class performance across all aspects of the organization.
What might I learn?
A way to engage all in creating Inclusive Excellence. Lessons from the US military and their parallels to the story of Harry Potter. How belt systems and CI teams can destroy inclusive practices. How leadership language invites people to the party. There are three things leaders can do to engage everyone every day: maximizing psychological safety to create environments where folks learn, contribute, and challenge the status quo.
Who might benefit? Anyone and everyone leading folks from the shop floor to top floor.
Dr. William Harvey is a seasoned Operations Leader with extensive experience in chemical processing, manufacturing, and operations management. At Michelman, he currently oversees multiple sites, leading teams in strategic planning and coaching/practicing continuous improvement. William is set to start his eighth year of teaching at the University of Cincinnati where he teaches marketing, finance, and management. William holds various certifications in change management, quality, leadership, operational excellence, team building, and DiSC, among others.
Discover the innovative and creative projects that highlight my journey throu...dylandmeas
Discover the innovative and creative projects that highlight my journey through Full Sail University. Below, you’ll find a collection of my work showcasing my skills and expertise in digital marketing, event planning, and media production.
Business Valuation Principles for EntrepreneursBen Wann
This insightful presentation is designed to equip entrepreneurs with the essential knowledge and tools needed to accurately value their businesses. Understanding business valuation is crucial for making informed decisions, whether you're seeking investment, planning to sell, or simply want to gauge your company's worth.
Unveiling the Secrets How Does Generative AI Work.pdfSam H
At its core, generative artificial intelligence relies on the concept of generative models, which serve as engines that churn out entirely new data resembling their training data. It is like a sculptor who has studied so many forms found in nature and then uses this knowledge to create sculptures from his imagination that have never been seen before anywhere else. If taken to cyberspace, gans work almost the same way.
Remote sensing and monitoring are changing the mining industry for the better. These are providing innovative solutions to long-standing challenges. Those related to exploration, extraction, and overall environmental management by mining technology companies Odisha. These technologies make use of satellite imaging, aerial photography and sensors to collect data that might be inaccessible or from hazardous locations. With the use of this technology, mining operations are becoming increasingly efficient. Let us gain more insight into the key aspects associated with remote sensing and monitoring when it comes to mining.
Putting the SPARK into Virtual Training.pptxCynthia Clay
This 60-minute webinar, sponsored by Adobe, was delivered for the Training Mag Network. It explored the five elements of SPARK: Storytelling, Purpose, Action, Relationships, and Kudos. Knowing how to tell a well-structured story is key to building long-term memory. Stating a clear purpose that doesn't take away from the discovery learning process is critical. Ensuring that people move from theory to practical application is imperative. Creating strong social learning is the key to commitment and engagement. Validating and affirming participants' comments is the way to create a positive learning environment.
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What is the TDS Return Filing Due Date for FY 2024-25.pdfseoforlegalpillers
It is crucial for the taxpayers to understand about the TDS Return Filing Due Date, so that they can fulfill your TDS obligations efficiently. Taxpayers can avoid penalties by sticking to the deadlines and by accurate filing of TDS. Timely filing of TDS will make sure about the availability of tax credits. You can also seek the professional guidance of experts like Legal Pillers for timely filing of the TDS Return.
Accpac to QuickBooks Conversion Navigating the Transition with Online Account...PaulBryant58
This article provides a comprehensive guide on how to
effectively manage the convert Accpac to QuickBooks , with a particular focus on utilizing online accounting services to streamline the process.
The world of search engine optimization (SEO) is buzzing with discussions after Google confirmed that around 2,500 leaked internal documents related to its Search feature are indeed authentic. The revelation has sparked significant concerns within the SEO community. The leaked documents were initially reported by SEO experts Rand Fishkin and Mike King, igniting widespread analysis and discourse. For More Info:- https://news.arihantwebtech.com/search-disrupted-googles-leaked-documents-rock-the-seo-world/
Cracking the Workplace Discipline Code Main.pptxWorkforce Group
Cultivating and maintaining discipline within teams is a critical differentiator for successful organisations.
Forward-thinking leaders and business managers understand the impact that discipline has on organisational success. A disciplined workforce operates with clarity, focus, and a shared understanding of expectations, ultimately driving better results, optimising productivity, and facilitating seamless collaboration.
Although discipline is not a one-size-fits-all approach, it can help create a work environment that encourages personal growth and accountability rather than solely relying on punitive measures.
In this deck, you will learn the significance of workplace discipline for organisational success. You’ll also learn
• Four (4) workplace discipline methods you should consider
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Explore our most comprehensive guide on lookback analysis at SafePaaS, covering access governance and how it can transform modern ERP audits. Browse now!
3.0 Project 2_ Developing My Brand Identity Kit.pptxtanyjahb
A personal brand exploration presentation summarizes an individual's unique qualities and goals, covering strengths, values, passions, and target audience. It helps individuals understand what makes them stand out, their desired image, and how they aim to achieve it.
RMD24 | Debunking the non-endemic revenue myth Marvin Vacquier Droop | First ...BBPMedia1
Marvin neemt je in deze presentatie mee in de voordelen van non-endemic advertising op retail media netwerken. Hij brengt ook de uitdagingen in beeld die de markt op dit moment heeft op het gebied van retail media voor niet-leveranciers.
Retail media wordt gezien als het nieuwe advertising-medium en ook mediabureaus richten massaal retail media-afdelingen op. Merken die niet in de betreffende winkel liggen staan ook nog niet in de rij om op de retail media netwerken te adverteren. Marvin belicht de uitdagingen die er zijn om echt aansluiting te vinden op die markt van non-endemic advertising.
2. LEGAL STRUCTURES Three ways to organize your business are: Sole proprietorship Partnership Corporation
3. Owned by 1 person Simple and inexpensive Owner makes all decisions Owner & business are “one” Easy reporting & filing
4. SOLE PROPRIETOR Advantages Inexpensive to setup Easy to administer and get things going Simple to shut down Can use losses against other sources of income in loss years Disadvantages Unlimited liability Difficult to obtain funding or bank loans Impression to clients and customers Not as much tax planning available Not a lot of options when selling
5. PARTNERSHIP Association or relationship between two or more people Can also be between corporations, trusts and other partnerships Also very simple to set up with nothing more than a verbal agreement if warranted All partners are bound by each others actions in the business (except in a L.L.P) Reporting is straightforward in most cases
6. Relationship between people Other entities: Corps, trusts Simple to setup even verbal Partners bound by actions of other partners Reporting straight-forward in most cases
7. PARTNERSHIPS Advantages Duties shared by more than one owner Expertise of the partners May be easier to fund the business Losses can be used against other sources of income in loss years Disadvantages Joint and several liability Death of a partner means the end of the partnership Disagreement among partners could be detrimental to business
8. Separate legal entity Owners & management are separate More difficult to setup & administer Additional filing requirements
9. CORPORATION Shareholders supply corporation with money by buying shares of corporation but do not own business or property belonging to corporation Corporation’s income is subject to tax separately from shareholders Directors manage corporation and delegate management of day-to-day operations to Officers
10. CORPORATION Advantages Limited liability of all shareholders Easier to obtain funding and raise capital Shares can be sold or transferred for capital gain ($750,000 exempt) Continues after the death of a shareholder Disadvantages Expensive to setup More administrative work needed Annual filing requirements Annual legal and accounting costs More difficult to shut down
11. AGREEMENTS Description of business Contribution to capital Division of net profits Authority to sign contract Expulsion and admission of partners
12. AGREEMENTS Must deal with the “Probabilities” and issues that can arise in your business Death Disability Retirement Bankruptcy/insolvency Termination of employment Disputes
13. AGREEMENTS Buy/Sell Provisions How to deal with deadlock in management Shotgun clauses Funding mechanism Mediation/arbitration Non-competition/Non-disclosure
14. FACTORS TO CONSIDER Each form of organization has its advantages and disadvantages These will be outlined so that you can make the best decision pertaining to your personal situation Consult with a professional accountant and/or lawyer to make your final decision Once a decision is made, you are not trapped but it can be an administrative hassle
15. PAYING TAXES Proprietorship Business activities reported on form T2125 Statement of Business Activities to be filed with your T1 personal income tax return Return due by June 15th of the following year to avoid late filing penalties Any tax liability should be paid by April 30th to avoid interest Personal and business taxes are all filed together on one tax return
16. T1 General 2125 – Business statement Due June 15 Pay by April 30
17. PAYING TAXES Partnerships Also reported on T2125 to be filed with your T1 personal income tax return Income for the partnership is recorded on your taxes, with only your share being reported on the proper tax return line. Taxes will be paid on your share Due dates are same as proprietorship (June 15 due date, with taxes to be paid by April 30th) Partnerships with 5 or more partners will have other filing requirements
18. CORPORATE TAX REPORTING Corporations Being a separate legal entity, corporations file their own tax returns Federal T2 and corresponding Provincial tax returns are required filing each year Due date is 6 months after your corporation’s year end Taxes owing should be paid either 2 months or 3 months after the corporation’s year end
19. DECISION TO INCORPORATE Canadian Controlled Private Corporation (CCPC) Small business deduction (on first $500,000 tax is about 15 - 18% depending on your Province Ability to defer taxes The $750,000 capital gains exemption on share sale Facilitate cash management and discipline Pay dividends at a lower rate in the future Advanced tax planning strategies (IPP, PHSP, EPSP)
20. CHOOSING A BUSINESS NAME Three types of business names to choose from: Doing business under your own name – You do not need to register, i.e. John Smith “Doing Business As” or “Operating As” – Gives you the right to operate a business of a specific name – Smith’s Construction Incorporated name which includes the words Limited, Ltd., Corporation, Incorporated, or Inc. – i.e. Smith Construction Limited
26. REGISTRATION Corporations: Named vs. Numbered Name - More $$ - More distinct, descriptive Numbered - Less $$ - Determined for you - Depending on jurisdiction, the words “Ontario” or “Canada” will be included in a number name.
27. CHANGING STRUCTURE Sole Proprietorship Corporation Been running your business as a proprietor but not want to incorporate Section 85 Rollover Transfer all business assets to new corp. Typically will put the proprietor in the same tax position as before he/she incorporated
28. CHANGING JURISDICTION Provincial Federal Most jurisdictions will allow corporations to migrate to another jurisdiction File a Continuance - Permission from jurisdiction you wish to leave - Requires shareholder approval Legal matter – see your lawyer
29. OWNER RESPONSIBILITES Decision-making and business management Contractual obligations Employees – Standards, Human Rights etc. Collect and remit sales taxes (GST, PST) Withhold taxes from employees and remit (CPP, EI and tax) File appropriate tax returns as discussed
30. SHAREHOLDER DUTIES Own the corporation – liable to 100% of investment May be asked to guarantee corporate debts Annual S/H meetings: pass resolutions, elect officers, auditors Approve bonuses, dividends, loans, etc. Receive and approve financial statements Approve fundamental changes (USA)
31. ROLES/DUTIES OF DIRECTORS Manage or supervise management of business Fiduciary Duty and Standard of Care (make further inquiry if a reasonable person would) Errors that could have adverse impacts Not responsible for breach duties if acted in good faith by relying on financial statements of independent experts
32. Canadian Small Business Course www.sbclearnbusiness.com Visit us online and take the Canadian Small Business Course for the in depth video tutorials related to these slides
33. Canadian Small Business Course www.sbclearnbusiness.com Or take individual modules such as this presentation: Module 1: Forms of business organization Module 2: Starting a business step-by-step Module 3: Compensation strategies Module 4: Tax planning and strategies Module 5: Expenses and deductions
Editor's Notes
One important determination is where you want to take your business. Is it something you’re doing on the side? Do you plan on expanding your business? Hiring employees? How much money will you realistically be making? How much money will you need for your living expenses and lifestyle.These are important considerations when deciding whether or not to take the simple approach and run your business as a proprietorship.Example: Jason is a painter who does work for various contractors and clients around the city. After expenses, he expects to make about $40,000. He will need to draw on all of this income for his lifestyle.From NOP PresentationA sole proprietorship is the simplest arrangement for carrying on a business. It exists wherever a person carries on a business for their own benefit. The individual is the sole owner of the business and the income or losses of the business belong only to the individual. In a sole proprietorship, there is no difference between you and the business. You are solely responsible for carrying on the obligations of the business. You are also liable for any tortious acts of the sole proprietor or employees of the sole proprietor. All of your business and personal assets can be taken by creditors if the sole proprietorship cannot fulfill its debts/liabilities. However, you can limit your liability by contract or by buying insurance.
Typically in a partnership, a partnership agreement is drawn up between all the partners.Example: James is a photographer and David is a videographer. They formed a partnership specializing in wedding photos and videos. After expenses, the partnership expects to make about $100,000From NOP Presentation:A partnership is two or more people carrying on a business together with a view to profit. There are three things needed to make a partnership: First, there must be a “business.” Any commercial activity will be considered a business. Second, the reason for the activity must be to make money (i.e. to profit) Third, there must be an agreement between the partners to carry on the business together andto share the profits.A partnership is like a sole proprietorship because the partners carry on the business themselves directly. There is no separation in law between the partnership and its partners. Examples of partnerships include: law and accounting firms, or a hot dog vending business owned by two brothers.There are two types of partnership. General and Limited Partnership. The main difference between the two is LIABILITY.General: In a general partnership, partners agree to be bound by all the actions of the other partners who are acting in the normal course of the business. All the partners are jointly and severally liable for any debts and obligations incurred by the partnership or another partner. Joint and severally liable means that each partner is liable with the other partners for the full amount of the debt. Where one partner lacks enough for his/her share, it comes out of the other partners’ pockets. Each partner is personally liable for the partnership, meaning that all of the partner’s personal assets are also up for grabsLimited: In a limited partnership, the liability of each limited partner is restricted to the amount of money that the partner has contributed. The law requires that the partnership have one general partner who is liable for the partnership. A limited partnership is NOT the same as an L.L.P. (Limited Liability Partnership). With an L.L.P. if one partner is negligent, the claim will only be against that partner’s personal assets who was negligent.
Corporations are separate legal entities so they can sue and be sued in the corporate name. A corporation's income is determined and subject to tax separately from the shareholders. In this way, the corporation owns and operates the business and incurs the liabilities, the shareholders do not. Because a corporation is a separate legal entity, an individual can be an owner (shareholder), a manager, and an employee of the corporation. A corporation is managed by directors. Directors of the corporation make the big management decisions and delegate day-to-day management decisions to the Officers of the corporation. Officers manage the employees of the corporation. In a simple world, shareholders are passive, with their only power being to vote for the election of directors or on proposals.
Corporations are separate legal entities so they can sue and be sued in the corporate name. A corporation's income is determined and subject to tax separately from the shareholders. In this way, the corporation owns and operates the business and incurs the liabilities, the shareholders do not. Because a corporation is a separate legal entity, an individual can be an owner (shareholder), a manager, and an employee of the corporation. A corporation is managed by directors. Directors of the corporation make the big management decisions and delegate day-to-day management decisions to the Officers of the corporation. Officers manage the employees of the corporation. In a simple world, shareholders are passive, with their only power being to vote for the election of directors or on proposals.
Partnerships are governed by the Ontario Partnerships Act. This Act sets out the default rules for a partnership. Often you will want to change these standard rules, to do so, you need to create a partnership agreement. Partnership Agreements describe the business. For instance, they will deal with how the partnership name will be used upon the death of a partner. Agreements will discuss how each partner will contribute to the capital of the business and set out the division of net profits. An agreement can also indicate who has the authority to sign contracts. Finally, it provides a scheme for the expulsion and admission of partners. Under the Act, dissolution takes place upon death or insolvency of a partner but an agreement can require unanimous or majority consent for dissolution.
SHOTGUN CLAUSEThis is often used to force a buy-outIt works like this:Meredith and _______ are shareholdersMeredith offers _______ a certain price to buy-out my shares._______ can accept my offer or offer the same terms to me in which can I must accept.The essence is that one-party will buy out the other shareholder. This is easy if a shareholder wants to pursue other interests* Ideal for small businesses where the share values are not too highDuty of Confidence There will be trade secrets that arise in the course of businessConfidential information may be disclosed to shareholders, particularly those in a director’s roleAgreement will deal with remedies for breachConsider the scope of the information that will be received* NDAs should be considered for employees as well
The Business Names Act regulates the use of names in Ontario. Sole Proprietorships: S. 2(2) of the BNA requires the sole proprietor to register the business name if it is different from the name of the individual.Partnerships: BNA states that no persons associated in a partnership shall carry on business or identify themselves to the public unless the partnership is registered by all partners. However, you do not need to register unless the partnership name is different than names of the partners. If the partnership is an LLP under the BNA, the Partnerships Act requires that specific words or abbreviations for LLP are included in the name. Note that limited partnerships are governed by the Limited Partnerships Act.The partnership name forms part of the goodwill of the business and therefore can be used by each partner if the partnership is dissolved. In order to avoid this, a partnership agreement should speak to this.
National, or federal incorporation, allows you to carry on businesses in different jurisdictions throughout Canada. However, with federal incorporation, at least 25% of your directors must be Canadian.
A business can incorporate under the laws of Ontario (OBCA) or Canada (CBCA). It is less expensive to incorporate in Ontario and there are also less reporting requirements. However, your business name will only be protected in Ontario and there is often more prestige associated with national incorporation. Both Acts require the word “Limited,” “Limitée,” “Incorporated,” “Incoporée,” or “Corporation,” or the corresponding abbreviations to be part of the name of every corporation. Name:If the you want to incorporate under a name, the name will be searched (NUANS search) to determine if there are other businesses with the same name.Names are important because people strongly associate names with products etc…Thus, your business will have a stronger identity. In this way, names are more distinct and descriptive than numbers. However, names are more expensive than numbers. Number:The number will be assigned to your business when you apply to incorporate. Depending on which jurisdiction you incorporate under, the words “Ontario” or “Canada” will be included in the number name.
What do you do if you start off as a sole proprietorship and want to become a corporation?NOTE: A s. 85(1) rollover is available to a taxpayer, which includes an individual or a corporation, but not a partnership; however, a similar rollover for partnerships is available under s. 85(2). What is a s.85 rollover?It is a tax-deferred transfer of certain assets from one taxpayer to a taxable corporation.How does a s.85(1) rollover work?In this case, the sole proprietor and the corporation must both elect to claim the rollover with the CRA. They must state an elected amount for each asset that is transferred. The elected amount is then deemed to be the sole proprietor’s proceeds of disposition (proceeds of sale) for the asset and the corporation’s cost to purchase the asset. In order for the parties to avoid tax, they must choose an elected amount that will not give rise to income or capital gain for the sole proprietor (this is why they usually pick the tax cost of the sole proprietor, ie: the amount that the sole proprietor paid for the asset). What is the result?The corporation inherits the assets at the tax cost of the sole proprietor, which means that the corporation does not pay tax on the assets until it disposes of them. When it sells the assets for fair market value, the corporation will pay tax on the FMV – the tax cost (usually the Adjusted Cost Base ACB of land or shares) of the asset.The sole proprietor sells the assets to the corporation but only has to claim the elected amount (the amount equal to what she paid for the assets (tax cost (ACB)). This means that the sole proprietor does not have to pay tax on the income, nor does she incur a capital gain. One thing to keep in mind though, is that the sole proprietor must receive at least one share in the capital stock of the purchasing corporation as consideration for the transfer.
Most jurisdictions in Canada allow corporations governed under their corporate law to migrate to another jurisdiction and be continued under and governed by the corporate laws of another jurisdiction. This is called a Continuance.How does a continuance work? First, you must get permission from the jurisdiction you wish to leave.Second, you may require shareholder approval. Import: If you wish to be governed by the CBCA, than you must apply by articles of continuance. These articles of continuance become your articles of incorporation after the migration. Export: If you wish to leave a jurisdiction, the CBCA requires that you have received the authorization of your shareholders by special resolution. Then you must file an application for permission to continue. Why do business get continuances?One reason may be because they want to amalgamate and in order to amalgamate in Canada all corporations must be governed under the same corporate law. Another reason may be to take advantage of a certain corporate law not available in your jurisdiction (uncommon in Canada because all so similar).
Being the sole persons responsible for the business, owners have many varying responsibilities. Not only do they make the major decisions of the company, but they may manage the day-to-day operations of their business unless they delegate these to their employees. Speaking of employees, owners have general duties to conform with the Charter of Rights and Freedoms as well as with the Human Rights Code, ex: duty to accommodate. They also have to fulfill promises arising out of employment contracts, ex: notice. There is also a duty to fulfill obligations in contracts with suppliers, manufacturers, etc…In all businesses, there is a duty to remit certain monies to provincial authorities, ie: GST, EI, etc… and a duty to file regular tax returns
As we discussed earlier, shareholders invest money in the corporation in return to share in the growth of the business. Their liability is capped at 100% of the money they invested, unless they agree to guarantee a loan from the bank. (Shareholders should limit their liability in guarantees). Shareholders have annual and/or special meetings, these are where the shareholders are entitled to vote as to whether or not to pass a resolution of the directors. The most important right of a VOTING shareholder is to elect and remove directors. VOTING shareholders also appoint an auditor at each annual meeting. Shareholders also have a right to receive the corporation’s financial statements at the annual meeting of shareholders. Another important role of shareholders is the approval of fundamental changes of the corporation. An example of a fundamental change is an amalgamation. Shareholder agreements are contracts between the shareholders about how they will vote their shares. Unanimous Shareholder Agreements (USAs) restrict the powers of directors to manage the corporation and give shareholders the rights, powers, duties and legal obligations that they have removed from the directors.
Directors are required to manage or supervise the management of the business and affairs of the corporation (s.115(1) OBCA). This includes assigning the offices of the corporation, appointing officers and their duties, delegating to officers day-to-day powers of management. There are two obligations imposed on directors by the OBCA:The first is a fiduciary duty and the second is a standard of careFiduciary Duty:A director has a duty to act honestly, in good faith, and in the best interests of the corporation. They must make their decisions based on the best course of action for the company. This is because a director’s decisions may expose others to the risk of loss. For example, a director cannot take advantage of a corporate opportunity Standard of Care:Each director (and officer) must “exercise the care, diligence, and skill that a reasonably prudent person would exercise in comparable circumstances” (OBCA s.134(1)(b)). If a director fails to meet this minimum standard of care, they will be liable to the corporation for damages resulting from negligence or bad faith. In order to meet this standard, directors should be aware that if they are not present at a director’s meeting they are deemed to have consented to the resolutions passed unless they dissent within 7 days of becoming aware of it. Further duties:Directors must disclose any interests they have in material contracts of the corporation. A Director is liable for making errors that could adversely impact the finances of the corporation. For example, directors cannot declare a dividend if there are reasonable grounds to believe that the corporation will not be able to pay its liabilities. However, Directors are NOT responsible for breach these duties if they acted in good faith in reliance on financial statements of independent experts