Business formation in British Columbia: 4 FAQs
Those who are looking to start a business likely have a lot of questions. One of the earliest of those questions is whether to incorporate. The following will dive into this issue and provide information to help guide you through your decision.
Why should I incorporate my business?
One of the most important benefits of incorporation is liability protection. By incorporating your business, the company becomes its own separate legal entity. This means that the company is liable for its debts and actions, and not the owners/shareholders. Once incorporated, a client, supplier, or other party who demands payments or attempts to sue the company would generally go after the company’s assets, not your own personal assets.
There may also be tax benefits to incorporating, and we recommend that you seek qualified accounting advice to further assist in your decision.
What type of business structure is right for my needs?
There are many different options available. Three of the more common include:
- Sole Proprietorships. A sole proprietor operates the business directly, and is personally responsible for the debts and liabilities of the business.
- Partnerships. A general partnership consists of two or more parties that operate the business and become directly responsible for the debts and liabilities of the business. There are variations on the partnership, such as limited partnerships and limited liability partnerships.
- Limited companies. In this form, the business owners’ (i.e. shareholders) liability is limited to their investments within the business. This structure generally serves to protect a shareholder’s personal assets, as they are not personally responsible for the company’s debts and liabilities
Benefit and community contribution companies are also available and advantageous for those whose business purpose focuses on a societal or public benefit.
What do I need to incorporate a business?
You may choose to reserve a unique name with the BC Corporate Registry, then select articles (i.e. rules) for the company, and prepare an incorporation agreement. You will also need a registered and records office, or legal address where the government can send all correspondence, within the province. Finally, you should put together a minute book containing the legally required company records.
What else should I know?
Starting the business is just the beginning. Once established, you will still need to meet the province’s requirements relevant to your chosen business structure. For a company, these can include holding an annual meeting and filing an annual report within prescribed period of time.
It is also important to note a few additional points. First, this piece focuses on incorporation at the provincial level. Business owners may also want to consider the benefits and risks of incorporation at a federal level. Second, incorporation is not the only option. Some may prefer to register as a sole proprietorship or partnership. It is wise to speak with a lawyer about these options to better ensure you choose the path that works best for your business goals.