Canada - Articles of Incorporation Explained: Definition, Role and Importance

If you plan to establish a business in Canada, one of the most important steps of establishing your enterprise will be Articles of Incorporation. This document is essential for formally establishing your company and defines the structure, purpose, and regulations of your new business.

While Articles of Incorporation is the official name for the document, you might even encounter related terms like "certificate of incorporation" or "incorporation documents". This article will provide a comprehensive overview of what are Articles of Incorporation, why they are necessary for businesses, how to file one, and more.

What are Articles of Incorporation?

Simply put, Articles of Incorporation in Canada is a legal document that is submitted to the Provincial, Federal or Territorial governments in Canada. This document is mandated for the incorporation of any business in the company, as it outlines the regulations and purpose of the enterprise. This also separates the business owner and their enterprise as two different legal entities.

Generally, the Canadian authorities pose a requirement, wherein Canadian citizens or permanent residents should represent at least 25% of the directors in the newly incorporated company. This is also applicable to provinces such as Manitoba, Saskatchewan and Alberta. If your business cannot implement this ruling, you may consider establishing your enterprise in other provinces or registering as a small business.

Now that you know the basic principle of Articles of Incorporation, let’s find out why you need to file for one while establishing your business.

Why are Articles of Incorporation Important?

Filing an Articles of Incorporation in Canada is not just the legally correct practice to follow, it also provides a business in Canada opportunities to flourish and even protect itself.

The reasons why filing an Articles of Incorporation is important are:

• As mentioned above, filing an Articles of Incorporation separates the owner and their business liabilities. This means that your personal assets will be protected in any case of business-related liability.
• Filing Articles of Incorporation protects your company name within your jurisdiction and prevents any other party from using the same name. If someone tries incorporating the same or a similar company name, you will have the opportunity to legally make the company cancel or change their business name.
• Depending on the amount of revenue your business generates, filing an Articles of Incorporation may also help you save money on taxes. Generally, corporate tax rates are lower than personal tax rates. To take complete advantage of reduced tax rates, you will have to consult with your company accountant or a company formation services provider.
• Filing for Articles of Incorporation increases your credibility in the market in the eyes of customers, other businesses and investors. It also meets the needs of people who prefer to conduct business with an enterprise that is registered as a corporation.
• By having your business incorporated, various in-house processes such as dividing and transferring the business’s rights become much easier. Generally, businesses structured as corporations can easily divide and allocate business shares without the need to transfer any assets.

Who Needs to File Articles of Incorporation?

As mentioned above, anybody setting up a business in Canada should file Articles of Incorporation. If you are registering as a small business or sole proprietorship, you are not required to file Articles of Incorporation.

While filing your Articles of Incorporation, it is important to determine whether you will opt for federal or provincial incorporation.

Provincial incorporation means that your business will only be able to operate in the incorporated jurisdiction. This also signifies that your company name will be valid only within the jurisdiction.

Federal incorporation means that your business is allowed to operate across Canada, your company name is legally protected, and you also get more recognition in the market if you are conducting international business activities.

To select between both kinds of incorporations, you must consider factors such as:

• Whether you want to keep your business local or expand it
• Who you want to conduct business with
• Which part of Canada do you wish to establish your business in

Deciding the right kind of company incorporation in Canada will help you with the next step of the process.

When Should You File Articles of Incorporation?

Once you have decided on your company name and the kind of incorporation you wish to proceed with. It is also important to lay out details of your share class structure, the company’s directors and shareholders, along with any other important person involved in company formation.

What Information is Included in Articles of Incorporation?

While the information required for Articles of Incorporation is simple, it must be filled in and submitted correctly to the authorities.

Your Articles of Incorporation will include information such as:

• Your company name - which could be either a numbered name (e.g. 1234 Ontario Inc.) or a named corporation (e.g. ABC Holdings Inc.).
• Registered head office
• Directors’ citizenship status
• The names and addresses of the directors/incorporators
• Share structure
• Additional provisions
• Any restrictions for business activity and/or share structure transfer

Although filing Articles of Incorporation is a simple task, people often make simple errors during the filing process, which results in delays in business incorporation. It is important to avoid such mistakes to ensure a quick and trouble-free filing process.

What are Common Mistakes to Avoid When Filing Articles of Incorporation?

There are some simple, yet common mistakes people make while filing Articles of Incorporation.

Typical errors and omissions

A single spelling mistake in your Articles of Incorporation will not only cause confusion during the verification process but can also result in your company incorporation getting delayed or even cancelled.

Omitting important details in your registered address or of involved personnel in your company can also result in consequences. Such simple mistakes can be avoided entirely by ensuring the accuracy and completeness of your Articles of Incorporation.

Tips for ensuring accuracy and completeness

Here are some simple but helpful tips that will help you avoid mistakes while filing your Articles of Incorporation:

• Keep original documents nearby: Keep the passport copies and citizenship status papers of your directors and shareholders nearby while filing your Articles of Incorporation to have all the details handy.
• Proofread: Upon drafting your Articles of Incorporation, ensure that each involved member of the business proofreads it thoroughly to ensure that nothing is missing, omitted or incorrect.

While filing your Articles of Incorporation can be a straightforward process, it may be difficult to juggle that along with setting up a business in Canada. Obtaining accredited legal help can go a long way in helping you and your company.

Get the Best Legal Help to File Articles of Incorporation

Legal and compliance matters are extremely important when setting up a business anywhere in the world, especially in Canada.

With SFM, your company can sail not only through legal, and compliance matters easily but also with processes such as registering your company and conducting financial audits. SFM’s bespoke end-to-end services help you in matters such as filing Articles of Incorporation while providing:

• Convenience: SFM allows you to place an order for your company in less than 10 minutes. It just takes 3 simple steps to order your company through the SFM website here.
• Expertise: Partnering with SFM provides you access to top experts in legal, financial, and other areas of running a company.
• Personalized Support: SFM also provides personalized support in incorporating your company in case you face any challenges.
• Global Reach: SFM allows you to incorporate your new company in over 50 top jurisdictions across the world.

Seeking more detailed guidance or assistance, please reach out to SFM Corporate Services teams.

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