Incorporation

How BC law treats it

Under the Business Corporations Act, SBC 2002, c 57 (BCBCA), one or more incorporators sign an incorporation agreement and adopt articles, then file an incorporation application with the Registrar of Companies through BC Registries (s. 10). The application includes the notice of articles, which lists the company's name, registered and records office addresses, directors and authorized share structure (s. 11). The company exists from the date and time the incorporation application is filed, or a later date specified. A named company must first reserve its name; otherwise the company receives a number as its name. The articles are the company's internal rules and are kept at the records office, not filed. A BC company must also keep a records office with the records listed in the BCBCA, including a central securities register and a transparency register of individuals with significant control. A BC company needs at least one director, and a public company at least three; BC has no Canadian residency requirement for directors. A BC company can carry on business across Canada but must register extraprovincially in other provinces where it does business. A business can also incorporate federally under the Canada Business Corporations Act, which then requires extraprovincial registration in BC. Incorporation creates limited liability, but owners remain exposed through personal guarantees and statutory director liability, such as for unpaid wages under the Employment Standards Act, RSBC 1996, c 113, s. 96 and unremitted source deductions and GST under Income Tax Act s. 227.1 and Excise Tax Act s. 323.

What it means for your business

Incorporating separates business debts from personal assets, allows access to the small business tax rate, and makes it easier to bring in investors and plan succession. The decisions made at incorporation, such as share classes, articles, and who the first directors and shareholders are, are expensive to unwind later. Founders should set up the share structure, a shareholders agreement and a records office properly from day one rather than relying on default templates. Example: Two founders incorporate a BC company to launch a design studio. They file the incorporation application online, adopt articles with two share classes, issue founder shares by directors resolution and sign a shareholders agreement the same week.

Risks and common mistakes

Calling the filed document "articles of incorporation" and assuming the articles are filed with the Registrar. Using default articles and a single share class without considering future investors or family members. Failing to set up the central securities register and transparency register at incorporation. Assuming incorporation protects owners from personal guarantees or statutory director liability. Carrying on business in another province without extraprovincial registration there.