sole-proprietorships

Sole Proprietorship

What is a Sole Proprietorship

A sole proprietorship is a registration of a business that is owned by an individual. The proprietor is said to be self-employed. This is the simplest form of a business organization. The proprietor secures the capital, establishes and operates the business, assumes all the risks, accepts all the profits and losses, and pays all the taxes. Any legal responsibilities arising out of the business activities are the proprietor’s. All assets, business or personal, can be legally used to discharge the liability.

 

Is Registration of a Sole Proprietorship Necessary?

If an individual wants to carry on business under his or her own name then he or she does not need to register. In fact some provinces will not allow registration under your own name. However, if you wish to obtain other types of licenses for your business, you may still need to register and may need to choose a different name in order to do so. If the individual wishes to carry on business under a name other than his or her own then he or she must register that name. An example of a sole proprietorship would be Joe’s Dry Cleaning.

Register a Sole Proprietorship

What Jurisdictions in Canada Govern the Registration of Sole Proprietorships

Sole Proprietorships are governed pursuant to the provincial and territorial legislation in Canada. Depending on the province or territory in which you live, there will be a different procedure. However, basically a form will need to be completed and a fee will need to be paid. In some provinces or territories the name of the sole proprietorship will also need to be cleared and there is a fee for this. Refer to the individual provincial and territorial sections herein for sole proprietorships for more details about which provinces and territories require a name search report accompany a registration. For information on how to conduct a name search refer to the sections entitled Preliminary Name Search, Choosing a Name and NUANS Name Search Reports.

Why does the Business Name have to be Approved in Most Provinces or Territories

The practical reason why names have to be approved is to prevent the registration of names which are identical or deceptively similar.  Most provinces and territories will not allow an exact business name to be registered although Alberta and Ontario will allow you to do this.  The onus is still on you to ensure the name you choose and register is distinct and different from other names already registered.

 The law prevents the use of names which are so similar as to confuse or mislead people, and provides a record which allows the public to determine which individuals are behind the name.  The practice of registering the name does not mean you own the name.  It just means that the name is protected with respect to the public interest.  If you need more protection for your name you need to trade mark the name.

It is important to know that business names used in sole proprietorships do not have the same protection as a corporate name used for a company.

 

 What are the Advantages of a Sole Proprietorship

Simple Start Up – Starting a sole proprietorship is a simple registration although consideration should be given to the name guideline procedures.  The cost of registration is low.

Less Government Regulations – There are few government regulations to follow.  The registration usually has an expiry date and it will be necessary for the sole proprietor to remember to renew the registration since the government will most likely not send out a reminder.

Decisionmaking – You will make all of the decisions and choose your own work projects on your own timeline

Work Hours – The sole proprietor will be able to make his or her own hours

New Challenges – There will always be new challenges as the business expands and grows

Income Opportunities – If the business is successful you will most likely make more than you did as an employee.

Tax Advantages – The government provides many tax advantages to small business owners.

Work Environment – The sole proprietor will be able to create is or her own work environment that is comfortable for them.

Less Expensive to Run – It is cheaper to run a sole proprietorship because there are fewer government requirements and managing the tax filings is less complicated

Expansion of the Business – Once the business starts to grow it is relatively easy to expand the business into a partnership or a corporation

Profits – The sole proprietor receives all of the profits of the business and does not have to share them with anyone else.

 

What are the Disadvantages of a Sole Proprietorship

Limited Creativity – The sole proprietorship does not have any one else to run ideas by or to obtain fresh ideas from.

Longer Hours and Less Free Time – Although you may choose your own work hours it is most likely you will work more hours than you did as an employee

Less Security – Although no one can fire you your security is only as strong as your business position.  If the business is having financial difficulty it will affect you personally.

Personal Liability – The sole proprietorship is personally liable for the debts of the business and if the business has any financial difficulties, the creditors can come after the personal assets of the sole proprietor

Personal Taxation – You will be taxed against your personal tax return which can result in a higher tax rate if you make too much money

Less Money – You may make less money than you thought you would and may not be able to survive

Difficulty in Raising Capital – The proprietor may have difficult in raising capital and financing

Less Professional Appearance – A proprietorship appears as a less professional business in relation to an incorporated company.  Some potential business acquisitions could be lost because the business does not appear to be ….

Government benefits – You may not be eligible for government employment benefits, health and dental benefits, life and disability insurance benefits, a pension plan, etc. and will find it necessary to pay a large month premium to pick up these benefits in your business

Investment of Personal Funds into Business – You may need to invest your savings in your business

One Person Success – Your success will be dependent solely on you and the manner in which you conduct your business.  You will not have others to run ideas by or to help with the business.

Personal Liability – The sole proprietor is responsible personally for all of the obligations of the business including all losses and liabilities, including those arising from the mistakes of the sole proprietor or those of any employees he or she may have.  Any lawsuit brought against the business will be the responsibility of the proprietor if any money is owed.  Businesses which have any type of risk involved for employees, such as builders, contractors, may not be the best choice of business for a proprietorship because of the liabilities of any accidents that may occur and adequate insurance should be obtained

Death Results in Termination – The death, disability of the owner may result in the termination of the business

 

Taxation of Sole Proprietorships

Business income is taxed in the hands of the owner as personal income. All business losses, except for some, can be deducted from the owner’s personal income tax. At lower levels of income it may be more advantageous to be a sole proprietor because the corporate tax rate may be greater than the lowest personal income tax rates. At higher levels the corporate rate may be less. You should discuss this with your accountant before making a decision on the best form of business to start.

How Long Is the Registration of My Sole Proprietorship in Place

The registration of a sole proprietorship lasts from three to five years depending on where it is registered. The governments do not forewarn you that your registration is going to lapse and you must renew it just prior to or on the expiry date. Some jurisdictions may provide for a grace period. Further in some jurisdictions the registration is perpetual and it is up to you to cancel the registration if you decide to not continue the business at some point.  It is suggested that you renew just prior to the expiry date.

What Happens If I Do Not Renew My Registration on the Expiry Date

If you do not renew your sole proprietorship registration on time you will need to register your sole proprietorship as a new registration. It will be given a new registration number. If this occurs you should let Canada Revenue Agency know about the new registration number so they can connect it to your federal Business Number. You should send a copy of the new registration to them with your tax return.

Do I need a GST/HST Number for My Sole Proprietorship

If your sole proprietorship is making over $30,000 a year you must charge GST/HST. Once you register for GST/HST regardless of whether you have a gross profit of $30,000 you will be expected to charge GST/HST so make sure you are at this level before you do this. Your Revenue Canada Business Number is your base number. If you need a GST/HST number it is added as an extension onto the base number. Individuals will be issued one Business Number only. If you have more than one sole proprietorship, each of them will use the same Business Number. However, if you wish you can have two separate GST/HST numbers so you can track the GST/HST on each sole proprietorship separately OR, you can combine all GST/HST for all of your sole proprietorships under one GST/HST extension number. When you register for a GST/HST extension number to your Business Number you need to consider whether you have had a Federal Business Number issued in the past for a prior proprietorship. If this is the case you would use the same Federal Business Number and just let the government know that you have registered a new sole proprietorship by sending them a copy of the registration. If you wish a new extension number then you should request this from Revenue Canada Agency.

 

Register a Sole Proprietorship

What If the Information Provided on the Sole Proprietorship Form Changes

If any of the information on the form that you initial registered changes an amendment must be filed.

What If I Wish to Change the Name of My Sole Proprietorship?

The name of the sole proprietorship cannot be amended. If you wish to change the name of your sole proprietorship you will need to register a new sole proprietorship and cancel the existing one.

What if I Wish to Cancel my Sole Proprietorship?

In order to cancel a sole proprietorship you must file a cancellation notice.  The procedure to cancel is different in each province or territory.  We will be glad to assist you with your cancellation if needed.

What If I Do Not Register My Sole Proprietorship

If you decide to carry on business under a name other than your own and you do not register pursuant to the legal requirements you could be levied a fine. One of the purposes of registration is to allow individuals and corporations who contract your services to be able to include your contact information on court documents if they wish to sue your sole proprietorship. If at any time a client or customer determines that you are not registered, a complaint can be filed with the government and a fine could be levied.

On the other hand, if you wish to sue a customer for non-payment or otherwise, if you are not registered as required by law, you will not be able to pursue a lawsuit in any court.

The internet has enabled potential customers to look into businesses prior to dealing with them. In order to ensure these individuals decide to use your services or buy your products over others, a legal business is the first step in gaining their confidence.

What If I Wish to Conduct Business as a Sole Proprietorship in More Than One Province

Firstly you will need to ensure you are registered in your home jurisdiction. Secondly, you will need to register “extra-provincially” in any other jurisdiction. Contact us for more information about registering an extra-provincial sole proprietorship.

Renewing a Sole Proprietorship

A sole proprietorship registration will stay in effect for a period of three to five years depending on the province or territory. The onus is on the sole proprietor to ensure his or her registration is renewed. The government will not remind you that your registration is going to expire. It is up to the sole proprietor to keep track of the expiry date and to renew the registration just before that date. In order to renew a registration you can follow the same procedure as you did for registering the sole proprietorship in the first place.

Financial Year End of a Sole Proprietorship

A financial year end of a sole proprietorship is December 31st since it coincides with filing your personal tax return.

 

Why Is it Important that the Address of my Sole Proprietorship is Correct?

It is important that the government knows your current address. The government occasionally changes policies and sends out information to the address on file. If they do not have your correct address you may miss out on valuable information that could affect your business.

general partnership

Partnership Registration

A partnership occurs when two or more people decide they are going to work together in a business.  

Types of Partnerships

There are three types in Canada.

  1. General Partnerships A general partnership occurs when all individuals have equal control over the business and make decisions together.
  2. Limited Partnerships This type occurs when one partner decides to agree to be a partner, and in most cases provide some funding to the business, but does not wish to be part of the day to day operations. His input is considered to be limited. It can be formed with one general partner and one limited partner.
  3. Limited Liability Partnerships This type provides that the partners are not responsible for the debts, obligations, or liabilities of the business resulting from the actions or negligence of another partner, employee or agent of the business. Lawyers and accountants generally form LLPs.

Register a Partnership

Is There Any Limit on the Number of Partners

No, there is no limit. A limited partnership would have to have at least one limited partner and one general partner however it could have as many of each as it wishes.

A general partnership must have at least two general partners and can have as many general partners as it wishes but it would not have any limited partners.

Do I Need a NUANS Name Search to Register

In some provinces and territories you will be required to provide a NUANS Name Search report or similar report to register. In Ontario and Alberta this is not required but it is recommended.NUANS Report

 

Should You do a Preliminary Name Search for the Name

Yes, you should. It is very important that you ensure that the name you are choosing for your business is not similar or the same as any other name already registered.

Even if the name is exactly the same, except for the ending of the name in the case of a corporation, you should still not use the name. An example of this would be if you were to register a partnership called “Johnson Partners” and there was already a name called “Johnson Partners Ltd.’

In some jurisdictions the government would allow you to do such a registration but it would not be a good idea since it is a conflict and Johnson Partners Ltd. might not be too pleased with your choice and could take you to court in an attempt to have it changed if it is a company that is highly placed in the marketplace. Your proposed partnership name should be as distinct and different from all other business names, partnerships, sole proprietorships, trade-marks or companies as possible.

Can Companies be Partners of a Partnership

Absolutely. Sometimes two or more companies will decide to form a partnership.

All corporate partners must be registered in the province where the partnership is formed.

If they were registered in another province then they must first be extra-provincially registered in the province where the business will be formed.  Each company will be given a corporate registration no. in that province which will be required in order to register the partnership with those corporate partners.

 

What Information is Required to Register

The following information is required; 1) The name of the partnership 2) The province or territory where the partnership is to be situate 3) The business address of the partnership 4) The mailing address of the partnership (which can be the same) 5) The name and home address of each partner 6) The purpose or nature of business of the partnership 7) If any partner is a company then the company’s corporate number.

 

What are the Advantages

They are easy to form and low on start up costs. Each partner will bring his or her own skill set to the business. One partner will have skills in some areas and another in other areas which can result in broader management knowledge and the ability to diversify tasks and responsibilities. More than one viewpoint can result in more effective decision making.

Partners pay taxes on business profits and deduct losses on their individual tax returns.

Percentages of profit and loss of each particular partner can be different percentages. A partner would share in the profits of the partnership in proportion to his or her percentage of investment. However, keep in mind that a partnership agreement must be in place to vary the profits. If there is no agreement each partner shares the profits and losses equally.

When a partnership is formed the partners pool their personal assets and therefore the business partnership may need less funding than a sole proprietorship. See sole proprietorships for more information.

It is also easier to borrow from lending resources when more than one person is obligated to repay the loan. There is little government regulation for partnerships.

What are the Disadvantages

Each partner is liable for all of the business’s debts and obligations, even those incurred by one partner without the knowledge or authorization of other partners. If one partner is sued then the other partners in the business are equally responsible for any financial judgment imposed by a court.

Unlike a corporation, which is considered an entity on its own, partners are liable personally for any debts to the business. Partners are responsible for each of the other partner’s actions. Each partner is deemed to know any information that has been given to another partner. Therefore partners must be able to trust each other to reveal all pertinent information.

If there is no agreement in place, the business is dissolved upon the death or withdrawal of any partner or the acceptance of a new partner. An agreement may be entered into with clauses therein which provide that the surviving partners may purchase the interests of the deceased or withdrawing partner. See below for more information about these agreements.

Profits must be shared by all partners equally unless an agreement is in place to provide different percentages for different partners who invest more or less into the business.

If a partner, without the consent of the other partners, carries on a business of the same nature and he or she is competing with that of the partnership, the partner must account for and pay over to the firm all profits made by the partner in that business.

A partnership is a relationship between persons who are carrying on business in common with a view to a profit, whether or not the partners term their common business a partnership. Evidence of a partnership includes joint tenancy, sharing of gross returns and receipt of a share of profits. Relationships that were not intended to be partnerships may later be deemed as such and therefore you should be careful to clearly define your business relationships.

Purchase Partnership Registration

 

What are the Advantages of a Limited Partnership

Limited partners in a limited partnership are not liable for acts of the firm. If a limited partner can be shown to have taken part in the management of the business he or she may be deemed a general partner and would then lose his or her liability protection.

 

What are the Disadvantages of a Limited Partnership

Limited partnerships must comply with the regulatory requirements of the Limited Partnership Acts in the province or territory where the limited partnership was formed and as such must provide certain notices to the government and maintain certain records. A limited partner does not have any right to take part in management and therefore that person has little control over his or her investment in the business. It is more expensive to register a this type of business.

 

Should I Have a Partnership Agreement

Yes, you should have a partnership agreement. When one partner decides to leave a partnership the partnership is automatically dissolved unless a partnership agreement has been signed saying otherwise. If the business is viable the remaining partners might not wish to dissolve the business. Also, in cases of disputes, it is a good idea to have some clauses in your partnership agreement to cover possible situations that may arise. If you do not have an agreement in place then the Partnership Act of the particular province or territory in which the partnership was formed must be followed and in most cases the statute remedies are narrow. No matter how long you have known the person whom you decide to go into partnership with, including your spouse, you should still form an agreement.

 

Registration Requirements

The registrations usually have an expiry date which can be three to five years.  You will need to take note of this after registration because the government will not remind you of the renewal date.

Some provinces will also have a requirement of yearly annual return filings.  These are filings required by the Companies Branches rather than the tax department.  These annual returns must be filed or the partnership will be dissolved.

Do I Need a Solicitor to Prepare the Agreement

Yes, your best option would be to have a partnership agreement drafted by a solicitor and each party to the agreement should have independent counsel.

This is to ensure that each party is protected from any changes occurring in the business such as a death, resignation, sickness, disagreements, etc. and also to determine in writing how the financial aspects of the business will be managed. Without a well drafted agreement you could be opening yourself up to a problem in the future which could cost you a loss of income if you have not provided for a agreement with proper provisions.

Independent advice is especially important since a solicitor will look at the agreement from your personal view and insist on adding clauses to protect you in the future for any number of situations occurring.

NUANS Name Search Report

NUANS Name Search Reports

Which Provinces Accept a NUANS report versus a Specific Province Name Clearance Report?

The province and territories which accept the NUANS  report are:  Alberta, Ontario, New Brunswick, Federal, Nova Scotia, Prince Edward Island and Yukon.  All other jurisdictions in Canada will require a name search report specific to that province or territory.

In Alberta and Ontario you are not required to provide a name search report of any type for sole proprietorships, business names or partnerships, however, it is still advisable to perform a preliminary name search since the onus is on you to ensure the name has not been taken by any other business.  If you are ordering a  name search report or a name search specific to a province as required by the type of registration you are wanting, our service automatically includes preliminary name searches. The only time you would order a preliminary name search would be if you are registering a business name, sole proprietorship or partnership in a province that does not require a name search report such as Alberta or Ontario.

Name search reports and NUANS name search reports all provide the same kind of information.  They determine whether a proposed name has been used by any other business across Canada and also provide a list of similar names already registered.  Be advised that these  reports are specific to the province they are ordered for.  For instance a Federal NUANS report cannot be used for an Ontario company.

Purchase a NUANS Name Search Report

What is a Name Search Report

A name search report compares the name of a proposed business to all other names already registered across Canada.

A NUANS report is specific to certain provinces and is a seven-page report which is generated from the search system which compares a proposed name or trade-mark with the database of existing names that have been registered anywhere across Canada.

Let our Experts assist you with obtaining a NUANS or Name Search Report for your New Business
Let our Experts assist you with obtaining a NUANS or Name Search Report for your New Business

What Information is Provided by a Name Search Report or a NUANS Report

By comparing the proposed name against the NUANS name search system or a name granting system in a province or territory, any similarity existing between the proposed name and the names in the database, will show up on the name search report. This will allow you to determine whether you are planning on using a name for your company that is too similar to another name. It is important for your name to be as distinct as possible.  If you are ordering a name search for a province that does not accept the NUANS you will be provided with a name search that compares names to other names in that particular province or territory but the name search report will also look at similar names in other provinces right across Canada that may be a conflict.

 

What is A NUANS Search System

The NUANS search system is a computerized search system which contains a list of all of the company names, sole proprietorships, partnerships, business names and trade-marks registered in the federal, provincial and territorial jurisdictions in Canada. The purpose of the system is to keep track of all names registered across Canada.

Even if a province or territory has its own name search system in place, the NUANS system will pick up those names in its database and therefore when performing a preliminary name search the search system is the best way to get a pre-clearance of your name.

Only search houses can perform preliminary name searches or full NUANS name searches through the NUANS system with the exception of the federal government’s site which provides limited access to doing searches.

The federal website’s preliminary name search system is limited in that it does not allow for broad searches and it is not workable if ordering a Federal NUANS and it is limited with respect to doing preliminary name searches for other provinces and territories.  In order to effectively do a preliminary name search on your proposed business you must have an experienced search house perform the search.

What is a Name Search Report and NUANS Report Used For

A NUANS name search report must accompany articles of incorporation when incorporating a company in the federal, Alberta, Ontario, New Brunswick, Prince Edward Island and Yukon jurisdictions of Canada.

NUANS reports are also required in some provinces for registration of business names and partnerships.  In Ontario and Alberta you are not required to provide any form of name search when registering a sole proprietorship or partnership.

 

Do All Provinces and Territories Accept the NUANS Name Search

Some provinces and territories have their own name search system and they do not except the NUANS name search report. Those provinces and territories will require a name search specific to that jurisdiction.  The jurisdictions in Canada that do not accept the NUANS report are British Columbia, Manitoba, Saskatchewan, Nunavut and Northwest Territories.

If you are registering a sole proprietorship, business name or partnership in a province or territory where a name search or NUANS report is not required (such as Ontario or Alberta), it is a good idea to perform a preliminary name search to ensure the name is available but a full name search report or NUANS report would not be necessary.  All you need to do is ensure the name is available before you register your sole proprietorship or partnership.

Even though not all provinces and territories accept a NUANS report since all names registered in those jurisdictions are recorded in the NUANS database, it is still advisable to do a preliminary name search through the NUANS system to ensure the name is available.  Resources for Canadian Business Owners can provide you with a preliminary name search for situations for situations when a full NUANS report is not required.

If you require a name search report or NUANS name search report to register your company, business name, sole proprietorship or partnership, Resources for Canadian Business Resources Inc. will provide you with unlimited free preliminary name searches when a name search report or NUANS report is ordered through us.

Purchase a Name Search Report

How Does the NUANS Name Search System Capture the Names from the Other Name Search Systems in Canada

The governments which do not accept reports from the NUANS name search system provide a list of any names that have been registered in their province or territory to the NUANS name search system and these names are added to the NUANS system database on a regular basis.

 

Why is a Name Search or NUANS Report Necessary

You cannot incorporate a company with a name that is exactly the same as another name already registered.  It does not matter whether you are registering a company in PEI and the duplicate name is in BC, you will not be able to register an exact name.

When you go to incorporate a company the government must first know if that name has been taken. In order for the government to ensure that the name is free to use it needs to see a NUANS name search report or similar name search report depending on the jurisdiction.

The report will show the government whether there is an exact name already registered for the proposed name you wish to use. The name search report is also your way of determining whether there are additional conflicts to your name. The onus will be on you to look over the entire report and make sure you are not proposing to use a name that is even close to another corporate name or trade-mark since the owner of the name could still have a claim against you if your name is too similar and his or her company name has had a large presence in the marketplace for many years. Order a NUANS name search now.

 

NUANS Ontario
NUANS Ontario Report

How Do You Ensure Your Proposed Business Name is Distinct

Refer to the section on name guidelines for more information on how to ensure you have picked a distinct and descriptive name for your company that will not be challenged by the government or another company.

 

Are There Different Types of NUANS Name Search Reports

Each jurisdiction that accepts the NUANS Name search report will have its own form of NUANS report. If you are incorporating an Ontario company you will be required to obtain an Ontario NUANS Name Search report. If you are incorporating a federal company you will be required to obtain a federal NUANS name search report. If you are incorporating an Alberta company you will be required to obtain an Alberta NUANS Name Search report.  Despite the fact that each of these reports is different, all reports will search the NUANS database system for similar names right across Canada.

 

Why Are Federal Name searches different from Alberta Name Searches, Ontario NUANS, PEI and NB Name Searches

An Ontario company can be incorporated with any name which is different in any regard, even if it is only a few letters in the name. A federal company differs however because when the federal government reviews articles of incorporation together with a Canada NUANS it will not allow any name which is similar to another company in many regards. When you are submitting incorporation documents for a federal company ensure your name is as different as possible from any other company name being used in Canada. Be prepared that the government may also disallow your proposed name if it sounds the same as another existing company even if the spelling is substantially different. You should be prepared that your name might not be accepted. Each time you submit articles for review you will need to submit a new NUANS report. If the first name you pick is too close to others on record, then you will have to buy another federal NUANS and submit again. A qualified search house will be able to assist you with having a better chance of your NUANS report being accepted the first time. Resources for Canadian Business Owners has experience in having proposed names accepted even after they have been rejected. However, some times additional searches must be performed to rule out conflicting companies and there can be an additional cost here. It is possible to obtain an advance Name Decision report from Industry Canada before you submit your articles for filing. Resources for Canadian Business Owners will be glad to submit a request for a Name Decision for your federal incorporation.  This will also include as many preliminary name searches as you require without further cost. We are experienced in reviewing preliminary name search results through the NUANS system to help increase your chances of being accepted the first time round when you are submitting articles of incorporation for companies in the federal jurisdiction.

 

Why Does It Matter if I use a Name Similar to a Name in Another Province 

It may seem that if you are registering a company in Ontario and another company in the Northwest Territories has a similar name, that this should not be a problem. With technology as it is today, companies are conducting business across Canada, if not across the World. You will have no idea whether the company with the name that you are proposing may at some time in the future be conducting business in the very province you wish to register in and then there would be a conflict.  Further, the Canadian government provides that any company that is registered in any province or territory in Canada can apply to be registered to carry on business in another province or territory. It is therefore very important that your proposed name is distinct and descriptive.  This is called an extra-provincial registration.

NUANS Search

Is a NUANS Report Required for a Business Name or Sole Proprietorship Registration

A  NUANS Report is not required in Ontario and Alberta, and some other provinces when registering business names, sole proprietorships and partnerships. In Ontario and Alberta anyone can register the exact same business name or sole proprietorship as one registered already. However, it is advisable that you do a preliminary NUANS name search before you register to ensure no one else is using the name regardless.  This is the one time when you should pay for a preliminary name search for your business name.  There is no need to purchase a full NUANS report or other name search report for a business name, sole proprietorship or partnership being registered in Alberta and Ontario.  All that is required is to do a preliminary name search just to ensure you are picking a name that is different.  It is always advisable not to use a name that is too similar to another name since this would be a conflict for your business in the long run. Some business names such as “Bell Canada” have a high standing in the marketplace because of the number of years the name has been registered and the number of people who know the name.

You should be aware that there is no such thing as a Federal Business Name registration, Federal partnership registration or Federal Sole Proprietorship registration. Business names, partnerships and sole proprietorships are governed by the provincial and territorial jurisdictions in Canada.

What is a Preliminary NUAN Name Search

If you purchase a NUANS Name Search Report and the name you wish to use for your incorporation is on the report as registered for another company or business, you will not be allowed to incorporate with that name. It is therefore important that you do a preliminary NUANS name search first in order to ensure before hand that the name is free.    Otherwise, if you do not first ensure a pre-check of the name is done and you order a full NUANS report or other form of name search report, your registration could be rejected if the name is too similar or the same as another name registered.

Please note however that preliminary NUANS Name Searches are not fool proof and there is always a chance a conflict will show up on the full NUANS Name Search or other name search report that did not come up during the Preliminary NUANS Name Search.

You can keep buying full NUANS Name Search reports but it will become costly. It is better that you check the name first with a Preliminary NUANS Name search. Resources for Canadian Business Owners provides FREE UNLIMITED preliminary name searches with the purchase of a NUANS or Name Search Report.  We will make great efforts to pre-clear your name in advance so that the odds of your proposed name being rejected are reduced.

How do I Arrange to have a Preliminary Name Search

Resources for Canadian Business Owners Inc. will do as many preliminary Name Searches as you wish with the purchase of a full NUANS Name Search or other Name Search Report.  If you are not required to submit a name search report with your registration Resources for Canadian Business Owners will be glad to perform a preliminary name search for you at a nominal fee.  This service should only be used when a name search report is NOT required

How Long Does it Take to Get a Name Search or NUANS Report

If you are ordering a report from a province or territory that does not accept a NUANS report, it can take a few days to a week to obtain the report.  If you are ordering a NUANS name search report, it takes from 40 minutes to three hours to obtain a NUANS Name Search Report. Once you order a NUANS report a confirmation email will be sent to you to let you know that we have received your request. Depending on the number of searches requested at that time it might take us 40 minutes or three hours. Be assured though you will receive the NUANS in the same day whether you order it at 6:00 a.m. in the morning or 10:00 p.m. at night.  Frequently we have someone close to the computer for most of the day right up until late evening so feel free to contact us at any time of the day. We are open 7 days a week. We look forward to serving you.

How Long is a Name Search or NUANS Report in effect.

A NUANS name search report will be in effect for 90 days from the date of issue.  If yuou do not use the report until after that time you will be required to order a new one and most other name search reports are also effective for a similar length period.

Name Searches for Non-Profit Corporations and Charities

We can provide you with information about registered companies, partnerships, sole proprietorships or operating trade names on the public record throughout Canada including extensive due diligence searching and reporting.

We also provide registration services for Canadian companies, sole proprietorships, partnerships and operating trade names in the provinces and territories of Canada.

Our staff has over 30 years’ experience in corporate law and we will be glad to answer your questions.  We take pride in our work and will provide you with the best, fastest, accurate and reasonably priced service available.

Depending on the province or territory you wish to incorporate your non-profit corporation will depend on the type of name report that you get. There is no difference between a name search report for a not for profit corporation or charitable corporation and a share corporation. It is the province or territory that governs the report you get.

For instance, a name search report for a share company being incorporated in Ontario is the same report given to a non profit or charity corporation wishing to incorporate in Ontario, being an Ontario NUANS name search report.

NUANS Search Houses are trained on the best method of performing Preliminary NUANS Name Search reports in order to ensure that the most conflicts to your proposed names can be found prior to ordering a full NUANS Name Search Report.

If you incorporate a numbered company a NUANS name search report will not be required since the government will provide you with the next number in line. An example of a numbered Ontario company would be a corporation having a name such as 9999999 Ontario Inc.

A numbered federal company might be a corporation with a name called 9999999 Canada Inc. and an Alberta numbered company might be 2244444 Alberta Ltd.  The numbers are given out consecutively. You cannot choose the number for your company.

Qualifications for Directors of Ontario Companies

Qualifications for Directors of Ontario Companies

A director is an individual who is elected by the shareholders (owners) of the company to assist with the management and supervision of the day to day affairs of the company. Frequently the directors of a company are also the owners of the company.  Not just anyone can be a director of an Ontario company. In order to meet the qualifications for directors of Ontario companies reference must be made to the statute that governs Ontario companies.

How many directors can an Ontario Company Have

Ontario companies must have at least one director for private companies and at least three directors for public companies.  There is no limit on the number of directors an Ontario company may have and if a private company wishes to have many directors it may do so.

Who can Qualify to Act as a Director of an Ontario Company

The Business Corporations Act (Ontario) explains this requirement by outlining what disqualifies someone from being a director of an Ontario company.

The following persons are disqualified from being directors of an Ontario company:

    1. A person who is less than 18 years of age;
  1. A person who has been found under the Substitute Decisions Act, 1992 (Ontario) or under the Mental Health Act (Ontario) to be incapable of managing property or who has been found to be incapable by a court of Canada or elsewhere;
  2. A person who is not an individual; or
  3. A person who has the status of bankrupt.

Director’s Consent to Act as a Director

A person cannot be appointed to be a director of an Ontario company unless that person has agreed to do so.  The Act provides that after an individual is elected as a director they must consent in writing to the appointment within ten days.  This written consent is inserted into the minute book for the Ontario company and maintained there for future reference.

Director Consent Example

Resident Canadian Requirement for Directors of Ontario Companies

There is a requirement for 25% of the directors of an Ontario company to be “resident Canadians”.  For more information about this requirement refer to Resident Canadian Requirements for Directors of Ontario Companies.

description of officer positions

Officer Position Descriptions

All companies must have at least one officer.  There are many officer positions and each of those positions comes with a standard set of duties and requirements, although duties can be varied.  Below is a list of the most common officer positions and a description of what duties and requirements come with the position.

If you require information about officers also refer to our articles called Officers Titles and Positions and Appointing Officers.

 

Chairman of the Board

  1. appointed by the board from among its members
  2. must be a director
  3. chairs all meetings of the board and presents all information and resolutions to the board for its review and decision at the meetings

Managing Director

  1. appointed by the board from among its members
  2. head of the directors and given the powers the directors wish him or her to have

President

  1. the top officer of a company
  2. if there is no Chairman he or she will Chair all meetings of the board
  3. all other officers report to the President
  4. reports directly to the board of directors
  5. oversees the entire operation
  6. does not have to be a director unless the By-laws indicate so
  7. if there is only one officer that officer should hold the position of President

Chief Executive Officer

  1. frequently the President is also the Chief Executive Officer
  2. position on par with the President
  3. reports directly to the board of directors
  4. there can only be one Chief Executive Officer (CEO)
  5. the Executive Vice-Presidents and Vice-Presidents report to the CEO and the President
  6. oversees the entire operation

Chief Financial Officer

  1. most senior financial officer that manages the financial records of the compan
  2. reports to the President and Chief Executive Officer
  3. provides the President, Chief Executive Officer and directors with the financial statements for their review and approval
  4. reports on the financial position of the company

Executive Vice-President

  1. reports to the President
  2. the duties are assigned by the President and/or Chief Executive Officer
  3. there can be more than one Executive Vice-President

Vice-President

  1. duties can be a variety including having a number of Vice-Presidents managing specific departments in a company including

Secretary or Corporate Secretary

  1. attends all meetings of directors and shareholders and records the meetings
  2. presents minutes of meetings to the directors, and shareholders for approval
  3. maintains and keeps up-to-date the minute book records for the company
  4. gathers, collates and organizes all documentation being presented to the directors by the other officers of the company for review at directors meetings

 

Treasurer

  1. if there is both a Chief Financial Officer and Treasurer the Treasurer prepares and maintains the accounting records for the company and presents the results to the Chief Financial Officer
  2. if there is no CFO, the Treasurer would prepare and present the financial statements to the directors for review and approval each year
  3. responsible for the safekeeping of securities and the disbursement of funds of the company

 

description of officer positions

Officers Titles and Positions

Officers are appointed by the directors of a corporation.  There are many different officers titles and positions that can be held by individuals.  The scope of this Articles is to explain the different positions and statute requirements relating to them.

For information about how to appoint, remove or resign an officer refer to appointing officers.

Officer Titles for Private Companies

A private company is a company which does not sell shares to the general public.  It is a company that is owned privately by one or more individuals or corporations.

The following are the customary and standard officer titles used by private companies:

President

Vice-President

Secretary

Treasurer

General Manager

These officers titles are the most popular and are limited to just a few because private companies frequently only have a few principals.  Frequently there will be one person who holds the position of sole director, officer and shareholder (owner).  In this situation he or she will normally hold the positions of President and Secretary.  In other cases there will be two people as principals of the company, one of which will hold the position of President and the other the position of Secretary.

The officers titles given to individuals in private companies do not always denote the functions they will handle. Sometimes these titles are given to individuals so each owner and director will also hold an officer position.  For instance if there are two principals then one will be the President and the other will be the Secretary.  If there are three individuals one may be the President, the other the Secretary and the third may be the Treasurer.  In the case of a fourth individual, this person may be appointed to a Vice-President position.

Officers Titles in Public Companies

In public companies the officers titles can be very different.  Frequently officers for public companies have more functions and duties and they may be supervising a department of a number of people.  Some of the common titles for public companies are:

Chairman or Chairperson of the Board

President

Chief Executive Officer

Chief Financial Officer

Executive Vice-President

Vice-President, Marketing

Vice-President, Technology

Corporate Secretary

Assistant Secretary

Assistant Treasurer

How Many Officers Must a Company Have

All companies in all jurisdictions must have at least one officer.  Normally if there is only one officer, the title that person will hold is President.

Officers Titles Can be Flexible

There is no set rule with respect to any title.  A company can designate officer titles that it wishes, however, it is always good to have a President and a Secretary.

Can a Person Hold More Than One Officers Title

Yes.  An individual can hold more than one officer position.   However, some officer positions can only be held by one person.  For instance, there is never more than one President, Chief Executive Officer, Chief Financial Officer, Secretary or Treasurer.  There may be any number of Vice-Presidents and any number of Executive Vice-Presidents.

Board Appointed Officers versus Non-Board Appointed Officers

The board of directors of a company may appoint only a certain number of officer positions that are being held.  For instance, three individuals may be owners of a company and all three of them have been appointed by the board of directors to hold those positions.  A meeting was held to appoint them or a resolution of all of the directors was signed to appoint them.  These individuals are called board appointed officers because of the manner in which they were appointed.

There may also be a General Manager or a Manager, Technology or a Manager, Office Supplies.  These positions may not be officially appointed by the board yet they are officer positions.  They would be considered non-appointed officer positions.

Public companies also may have non-appointed officers.  The larger companies will have many departments operating different services and functions.  They may appoint Vice-Presidents of those departments.  There could be hundreds of Vice-Presidents appointed.  The board of directors, in this case, would not appoint those Vice-Presidents.

Does an Officer Have to be a Director

In some cases there are certain officer positions which cannot be held by anyone unless that person is a director.  For instance, a Chairman or Chair or Chairperson of the Board and a Managing Director (depending on what the governing statute says) must be a director to hold those positions.

Most governing corporate statutes are vague with respect to officers, however, the best way to determine whether an officer position must be held by a director is to check the statute.  When a statute is silent on the issue there is no restriction.

As well, the by-laws of the corporation must also be reviewed.  Some by-laws are set up to provide that certain officer positions must be held by a director and even though there may not be a statute requirement, if the by-law indicates this then the company must abide by those by-law provisions.

If a by-law provides that an officer position must be held by a director but the statute does not say it is mandatory, then the by-law can be amended.  The statute will provide the method by which a by-law can be amended.  For Ontario companies refer to Ontario By-laws Enactment, Amendment and Repeal.

description of officer positions

Appointing Officers

This article will provide guidance on how to appoint officers of a Corporation and how resignations and removal of officers are documented.

The directors of a corporation manage the affairs of the corporation.  As part of that management the directors are responsible for appointing officers to assist them with their duties.

Directors can appoint officers at a meeting or a resolution can be signed by all of the directors appointing officers.  For more guidance on preparing resolutions refer to directors resolutions.  For guidelines on how directors can go about appointing officers at a meeting refer to directors meetings.

The statute of incorporation and the by-laws of a corporation will govern the manner in which officers can be appointed, removed or resign.

Appointing Officers

The directors initially approve the officers of the Corporation upon incorporation or each year at the annual meeting (see below for more information on annual resolutions/meetings).

An example of a resolution appointing officers is as follows:

2-Appointment-of-Officers

Resignation of Officers

When an officer wishes to discontinue working with a company, that person will resign as an officer from the position he or she is holding.  See an example of a resignation of an officer below:

1-Resignation-of-Officer

Once a resignation has been received by the directors of a corporation, they will need to decide whether they wish to appoint another officer to replace the person resigning.  Depending on the type of position, it may not be necessary to appoint a replacement.  In situations where the directors wish to appoint a replacement officer, they will prepare a resolution in the form below:

3-DR-Resigning-Officer

Remove an Officer

The general operating by-law provides the manner in which an officer may be removed.  The directors of a corporation will approve a resolution to remove the officer and appoint a replacement to that position.  Below is an example of this form of resolution:

4-DR-Removing-an-Officer

Annual Resolutions

Each year a company must approve certain matters.  Officers may be excluded from appointment and new ones brought on at this time without being removed or resigning.  For more information these approvals see annual resolutions.

For more information about officers titles refer to Officers Titles.

Notice of Change

Most jurisdictions will provide in the governing statute that a notice of change must be filed to update the government’s database with respect to changes in officers and directors.  In many cases this can be done online using a company that has access to the databases or a paper filing can be done.  Paper filings are not as reliable but in most cases they are free to file.

Statute Reference:

Business Corporations Act (Ontario)

“1(1) “officer” means an officer designated under section 133 and includes the chair of the board of directors, a vice-chair of the board of directors, the president, a vice-president, the secretary, an assistant secretary, the treasurer, an assistant treasurer and the general manager of a corporation, and any other individual designated an officer of a corporation by by-law or by resolution of the directors or any other individual who performs functions for a corporation similar to those normally performed by an individual occupying any such office;

“senior officer” means,

(a)   the chair of the board of directors, a vice-chair of the board of directors, the president, a vice-president, the secretary, the treasurer or the general manager of a corporation or any other individual who performs functions for a corporation similar to those normally performed by an individual occupying any such office, and

(b)   each of the five highest paid employees of a corporation, including any individual referred to in clause (a);”

“117.  (1)  After incorporation, a meeting of the directors of a corporation shall be held at which the directors may,… (d) appoint officers;”

“127.  (1)  Subject to the articles or by-laws, directors of a corporation may appoint from their number a managing director or a committee of directors and delegate to such managing director or committee any of the powers of the directors.  2006, c. 34, Sched. B, s. 21 (1).”

Canada Business Corporations Act

“2(1) “officer” means an individual appointed as an officer under section 121, the chairperson of the board of directors, the president, a vice-president, the secretary, the treasurer, the comptroller, the general counsel, the general manager, a managing director, of a corporation, or any other individual who performs functions for a corporation similar to those normally performed by an individual occupying any of those offices;”

104 (1) After issue of the certificate of incorporation, a meeting of the directors of the corporation shall be held at which the directors may…..(d) appoint officers;”

Business Corporations Act (Alberta)

“121. Subject to the articles, the bylaws or any unanimous shareholder agreement, (a) the directors may designate the offices of the corporation, appoint as officers individuals of full capacity, specify their duties and delegate to them powers to manage the business and affairs of the corporation, except powers to do anything referred to in section 115(3), (b) a director may be appointed to any office of the corporation, and (c) 2 or more offices of the corporation may be held by the same person.”

Business Corporations Act (British Columbia)

“141 (1) Subject to subsection (3) and to the memorandum and articles of a company, the directors may appoint officers and may specify their duties.

(2) Unless the memorandum or articles provide otherwise,

(a) any individual, including a director, may be appointed to any office of the company, and

(b) 2 or more offices of the company may be held by the same individual.

(3) An individual who is not qualified under section 124 to become or act as a director of a company is not qualified to become or act as an officer of the company.

(4) Unless the memorandum or articles provide otherwise, the directors may remove any officer.

(5) The removal of an officer is without prejudice to the officer’s contractual rights or rights under law, but the appointment of an officer does not of itself create any contractual rights.”

The Business Corporations Act (Saskatchwan)

“116 Subject to the articles, the bylaws or any unanimous shareholder agreement: (a) the directors may designate the offices of the corporation, appoint as officers persons of full capacity, specify their duties and delegate to them powers to manage the business and affairs of the corporation, except powers to do anything referred to in subsection (3) of section 110; (b) a director may be appointed to any office of the corporation; and (c) two or more offices of the corporation may be held by the same person.”

The Corporations Act (Manitoba)

“99(1).  After the issue of the certificate of incorporation, a meeting of the directors of the corporation shall be held at which the directors may…..(d) appoint officers;”

By-law Provisions Regarding Officers

An example of a clause in a general operating by-law which governs how officers are appointed is as follows:

Appointment – The board may from time to time designate the offices of the Corporation, appoint officers (and assistants to officers), specify their duties and, subject to the Act or the provisions of any unanimous shareholder agreement, delegate to such officers powers to manage the business and affairs of the Corporation.  A director may be appointed to any office of the Corporation.  Except for the chairman of the board and the managing director, an officer may but need not be a director.  Two or more offices may be held by the same person.”

An example of a clause in a by-law which provides for the removal or resignation of an officer is as follows:

“ Term of Office (Removal) – In the absence of a written agreement to the contrary, the board may remove, whether for cause or without cause, any officer of the Corporation.  Unless so removed, an officer shall hold office until his successor is appointed or until his resignation, whichever shall first occur.”

Why does a Company Need a Minute Book

Why a Company Needs a Minute Book

You would be surprised at how often a minute book will be requested for review.  Not every organization that wishes to see it has a right to see it but you may not be able to move forward with your company’s work if you cannot show them the proof they demand. Below are some reasons why a company needs a minute book.

Some Reasons Why a Company Needs a Minute Book

  • An investor’s solicitor may wish to review the minute book to assure his client that he is investing in a valid and subsisting company and may wish to ensure the documentation required to bring the investor in is documented
  • A bank may request to see the book to confirm the structure before agreeing to loan money to the company and the bank may wish to see the by-laws in order to determine what authority the directors and officers have to borrow money
  • If you wish to sell the company you will definitely be required to show that you have documented all transactions from the date of incorporation to the point of sale
  • Transferring the business from yourself to your family cannot be done unless the minute book is in order since ownership must be able to be approved by the family member.  If there is no minute book, there is no evidence of ownership
  • Real estate transactions frequently result in ownership needing to be proved and without a complete minute book this cannot be done
  • Government offices such as the Workers Compensation Board may request your minute book to prove the percentage of ownership.  If you cannot provide proof of the percentage of ownership between you and your spouse, then you may pay more tax
  • When the company purchases a vehicle the government office may request to see the minute book before agreeing to put the vehicle in the name of the company
  • If the company is audited by the government it will be requested to present its minute book

Why a Company Needs a Minute Book – Annual Returns, Initial Returns, Notices of Change 

Certain returns and filings have to be done with respect to a new incorporation, on an annual basis and when changes have occurred in addresses, directors and officers.  By law these must be documented and filed with the government. The professional who sets up your company knows what these are, will file them upon incorporation as required and let you know what will need to be done in the future.  If these filings and returns are not maintained properly your company may be dissolved for non-compliance of the laws.

Why a Company Needs a Minute Book – Extra Costs Will be Incurred 

There are many reasons why a minute book may be requested.   As you can also imagine time is usually of the essence when a minute book is requested for review and that again can increase the cost of having one set up and documented.  As well, if the company has been around for many years that can increase the cost of creating a new minute book.

Setting up your minute book and maintaining it as you go along will save you money and aggravation in the long run.

If you wish to understand more about minute books refer to What Goes in a Minute Book

 

Partners in a Company

If you and a business associate start a company together and down the road there are problems, if there is no minute book set up and if approvals at meetings have not been documented properly, that person may be able to leave the company with more assets than he brought in because you will not be able to prove otherwise.  Shareholders agreements are frequently prepared in addition to the set up of the minute book to ensure all parties are protected.

Lawsuits are in the courts every day over problems that occur amongst shareholders of companies.  To protect yourself you should have a minute book set up which clearly shows ownership and it is prudent to also have a shareholders agreement prepared by a competent solicitor.

 

Resources for Canadian Business Owners has over 30 years’ experience in setting up, maintaining and rectifying the most complex of corporate minute books.

Ontario Business Corporations Act

Resident Canadian Requirement for Directors of Ontario Companies

All Ontario companies must have at least one director and this person must be a resident Canadian as defined in the Business Corporations Act (Ontario).  Director(s) are the individuals who manage and supervise the business on behalf of the owners (shareholders).  The directors will also appoint officers to assist.

The Business Corporations Act (Ontario) provides for a residency requirement for directors.  25% of the directors of an Ontario company must be “resident Canadians” as defined by the Act.  This means that if an Ontario company has one to four directors, at least one of them must be a resident Canadian.

Definition of Resident Canadian

A resident Canadian is defined in the Act as an individual who is (a) a Canadian citizen ordinarily resident in Canada, (b) a Canadian citizen not ordinarily resident in Canada who is a member of a prescribed class of persons, or (c) a permanent resident within the meaning of the Immigration and Refugee Protection Act (Canada) and ordinarily resident in Canada.

 

Meaning of the Definition of Resident Canadian

In lay terms, to be considered a “resident Canadian” pursuant to the Act, you must be a Canadian citizen living in Canada or a permanent resident living in Canada.  Therefore, if you are a Canadian citizen not living in Canada you would not qualify to be the sole director of a company, however, you could be a director as long as there were other directors elected to the board meeting the 25% resident Canadian requirement.  As well, a non-Canadian may not be the sole director of a company.

On the other hand, not all provinces and territories have the same rules.  In British Columbia the Business Corporations Act (British Columbia) does not provide for a residency requirement. Therefore a non-Canadian or a Canadian citizen not living in Canada may be the sole director of a BC company.  This is good news for those Canadians who wish to conduct business in Canada but also wish to live outside of Canada.  As well, foreign individuals are able to set up BC companies and act as the sole director of those companies since there is no requirement for them to live in Canada. Refer to our blog page for more information about residency requirements for BC companies.

Director and Shareholder Resolutions

Resolutions for Ontario Companies – Directors Resolutions | Shareholders Resolutions

Resolutions for Ontario companies are governed pursuant to the Ontario Business Corporations Act.

 

What is a Resolution

A resolution is a form of approval.  It can be to approve any matter that the corporation wishes. Some examples are approval of the change of registered office address of a company, approval to amend the articles of a company, approval to enact by-laws of a company, etc.

 

Resolutions are Approved by Directors or Shareholders

In some cases, certain matters must be approved by the directors and in other cases it may be that shareholder approval is required.  For instance if the company wishes to change its name from one alpha name to another alpha name the shareholders must approve this change before it can be implemented.  If a company wishes to enter into an agreement, the directors would approve the matter.  In some cases, both directors and shareholders may need to approve a resolution.

 

How Are Directors Resolutions and Shareholders Resolutions Approved

Resolutions can be approved at meetings of the directors or shareholders, pursuant to which every director/shareholder has been given notice of the meeting, and for which at least a quorum of those directors/shareholders showed up for the meeting. (i.e. the minimum number of directors/shareholders that can form a quorum is outlined in the company’s by-law and frequently is a majority).

Resolutions can also be approved without holding a meeting as long as all of the directors or shareholders, as the case may be, sign and approve a written resolution.

 

What Types of Resolutions are There

There are three types of resolutions:

Directors Resolution – This is a resolution that is either (a) passed by a quorum of directors at a meeting held to approve it, or (b) a resolution in writing signed by all of the directors.

Shareholders Resolution – This is a resolution that is either (a) passed by a quorum of shareholders at a meeting held to approve it, or (b) a resolution in writing signed by all of the shareholders entitled to vote.

Special Resolution – A special resolution means a resolution that is (a) submitted to a special meeting of the shareholders of a company duly called for the purpose of considering the resolution and passed by at least 2/3rds of the votes cast at the meeting, or (b) consented to in writing by each shareholder of the company entitled to vote.

What Does a Resolution Look Like

We have included an example of a resolution on this page.  There is always a heading on the resolution and a footer which shows the signatures.

The Heading should say either (a) Resolution of the Directors, or (b) Resolution of the Shareholders, or (c) Special Resolution as the case may be.

The footer should reference that all of the directors or shareholders are signing and the name of the statute that they are relying upon.

 

How do You Know Whether the Directors or Shareholders Must Approve a Particular Matter

The Ontario Business Corporations Act is online and can be searched to find out what type of approval you need for a matter.  For instance, let us say that you are changing the directors of a company by increasing the number.  If you search “number of directors” you will find section 125(3) which indicates that the number of directors is determined by special resolution.

director resolution

 

dividend resolution

Declaring a Dividend on Shares of a Company

Dividends are payments declared by the directors of a company which are paid to the shareholders (owners) of a private or public company out of the profits of that company.  When declaring a dividend the dividend must be declared equally to all shareholders of a class of shares and are paid out to each shareholder in proportion to the number of shares held.

When declaring a dividend, dividends can be paid as money, shares, warrants or property.

The directors of a company will pass a resolution at a meeting of the directors or by a resolution signed by all of the directors declaring a dividend to the shareholders of a specific class of shares.

Example of a Dividend Calculation

Below is an example of how a dividend is calculated and declared:

  • Declaring a Dividend in the aggregate amount of $10,000
  • The company has 2 shareholders with 100 issued and outstanding shares.
  • Shareholder #1 owns 40 shares.  Shareholder #2 owns 60 shares.
  • Shareholder #1 will receive $4,000 in dividend profits
  • Shareholder #2 will receive $6,000 in dividend profits
  • The dividend per share is equal to $100

Relevant Dates When Declaring a Dividend

  • The date the dividend is being declared payable.  Dividends cannot be declared payable in the past and this date must be either the same date of the resolution approving the dividend or for a future date.
  • The date upon which the shareholders of record is determined.  This provision comes into play more for public companies since shares for those companies regularly trade and the number of shareholders changes from day to day however even private companies must follow the same rules.  A record date must be determined when declaring a dividend and the only shareholders who would receive the dividend would be those who were shareholders of record on that particular date.  This prevents a shareholder who held shares in the company prior to the declaration of the dividend having a right to a dividend declared after he or she is no longer a shareholder.
  • The date of the directors resolution approving the dividend.  Frequently resolutions are left undated but it is very important when declaring a dividend to include the actual date the resolution was approved so that it is very clear that the dividend is being declared for a current or future date.

Which Classes of Shares are Eligible for Dividends

Common shares have the automatic right to receive dividends, however, preference or special classes of shares are only entitled to receive dividends if the Articles of the Corporation provide for it.   As well, there may be certain terms outlined in the Articles to be considered when declaring a dividend on special or preference shares.

 

Statutes Governing the Declaration of Dividends in Canada

Income Tax Act (Canada) deals with dividends in several different sections and it is a good idea to discuss dividends with your accountant before declaring them since there are tax consequences upon declaration of a dividend.

 

Approval for declaring a dividend is governed by the companies act or corporations act in each individual province or territory of Canada.  The various corporation statutes across Canada will provide either some or all of the following provisions:

A corporation shall not declare or pay a dividend if there are reasonable grounds for believing that (a) the corporation is, or would after the payment be, unable to pay its liabilities as they become due; or (b) the realizable value of the corporation’s assets would thereby be less than the aggregate of its liabilities and stated capital of all classes.

A corporation may pay a dividend by issuing fully paid shares of the corporation and a corporation may pay a dividend in money or property.

If shares of a corporation are issued in payment of a dividend, the declared amount of the dividend stated as an amount of money shall be added to the stated capital account maintained or to be maintained for the shares of the class or series issued in payment of the dividend.

Solvency Test When Declaring a Dividend

Most statutes will have a solvency test that must be met before any dividend is issued.    The company must not be insolvent and a dividend must not be declared if it would render the company insolvent thereafter.

Resolutions to Approve a Dividend

Example of a Resolution to Approve a Regular Dividend for Money:

“BE IT RESOLVED THAT a dividend in the aggregate amount of $** payable to the holder(s) of the issued and outstanding [common] shares in the capital of the Corporation is declared payable on [declaration date] to the shareholders of record of the Corporation as of [record date].

Any director and/or officer of the Corporation be and is hereby authorized and directed from time to time to execute and deliver all documents, agreements or other writings, whether under the corporate seal of the Corporation or otherwise, as may be necessary or advisable, and to sign for and in the name on behalf of the Corporation all such documents and writings and to take all such steps as in his or her opinion may be necessary or advisable for the purpose of giving effect to the foregoing.”

Certificates of Status for Canadian Companies

Example of a Resolution to Approve a Dividend for Property:

“BE IT RESOLVED THAT a dividend in the form of [described property] now registered in the name of the Corporation (the “Property”) is declared payable to the holder(s) of the issued and outstanding [common] shares in the capital of the Corporation.

Payment of the dividend shall be effected by transferring the Property now registered in the name of the Corporation to the holder(s) of the issued and outstanding [common] shares in the capital of the Corporation on [declaration date] to the shareholders of record of the Corporation as of [record date].

The amount of the dividend shall be equal to the fair market value of the Property, which is [$500,000].

Any director or officer of the Corporation is authorized and directed to do all things and executed all instruments and documents necessary or desirable to carry out the foregoing.”

Example of a Resolution to Approve a Dividend for Shares:

“BE IT RESOLVED THAT a dividend in the aggregate amount of $1,000 is hereby payable to the holder(s) of the issued and outstanding [common] shares in the capital of the Corporation on [declaration date] to the shareholders of record of the Corporation as of [record date],  such dividend to be paid and satisfied in full by the issuance to such holder(s) of the aggregate amount of [500] fully paid and non-assessable common shares.

The directors of the Corporation hereby determine that there shall be added to the stated capital account maintained for the [common] shares of the Corporation the amount of $1,000 in respect of the [500 common] shares of the Corporation issued in payment of the dividend declared.

Any one of the directors or officers is authorized and directed to do all things and execute any agreements or documents in order to effect the foregoing including the issuance of a certificate or certificates representing the [500 common] shares to the holders(s) of [common] shares of the Corporation.’

Declaring a Dividend[margin_25t]

Capital Dividends

These dividends are a different type of dividend and the rules are different.  This article is with respect to regular dividends only.  For more information about these dividends refer to Capital Dividend.

 

Buy Dividend Resolutions

If you wish to make things easy refer to this link for a number of templates that can be purchased relating to Approving Dividends Templates.

 

For more information about dividends refer to:

Capital Dividend

Capital Dividend Upon Redemption

Stock Dividend

Canadian Director Residency Requirement

Director Residency Requirements – Canadian Federal Companies

Canadian companies registered in the Federal jurisdiction must follow the requirements of the Canada Business Corporations Act with respect to director residency requirements.

What is a Resident Canadian as Defined by the Canada Business Corporations Act

The Canada Business Corporations Act defines “resident Canadian” as an individual who is:

  1. a Canadian citizen ordinarily resident in Canada;
  2. a Canadian citizen not ordinarily resident in Canada who is a member of a prescribed class of persons, or
  3. a permanent resident within the meaning of subsection 2(1) of the Immigration and Refugee Protection Act and ordinarily resident in Canada, except a permanent resident who has been ordinarily resident in Canada for more than one year after the time at which he or she first became eligible to apply for Canadian citizenship.

This means that a resident Canadian is a Canadian citizen or a permanent resident who lives in Canada.

How Many Directors of a Canadian Federal Company must be Resident Canadians

25% of the number of elected directors must be considered to be “resident Canadians”. This means that there must be one resident Canadian when the corporation has from one to four elected directors.  If a director at some point can no longer be considered a resident Canadian because for instance, he or she moves out of the country, then his or her status as a resident Canadian no longer applies.  A new director may need to be appointed to ensure the company is in compliance with the statute requirements.

 

What do You Need to Know About the Residency Requirement for Directors elected to Federal Companies

Let’s take the example of a permanent resident as defined in the Immigration and Refugee Protection Act (Canada) who is living in Canada.  This individual comes to Canada and is legally classed as a permanent resident.  This person registers a Canadian federal company and becomes the sole director of the company.  Since he is a permanent resident and he also lives in Canada, he is classified as a “resident Canadian” pursuant to the Canada Business Corporations Act and can be the sole director of a federal company.

Down the road this individual becomes eligible to become a Canadian citizen and does not apply to become one within one year after the time in which he was eligible to do so. At that point he is no longer classed as a “resident Canadian” and his company is no longer following the statute requirements to have 25% of the directors be resident Canadians and that company could be dissolved by Corporations Canada.

Let’s also take a look at another example with a different scenario.  A Canadian citizen living in Canada sets up a company with three other directors.  The other three directors do not live in Canada. He is elected a director along with the other three directors and is the “resident Canadian” director.  The federal Canadian company is in compliance with the Canada Business Corporations Act because 25% of the number of elected directors are resident Canadians.  The resident Canadian director decides to permanently move to Cuba.   He is still a Canadian citizen but he no longer lives permanently in Canada and therefore the company is no longer in compliance with the statute and another director will need to be elected to replace him.

 

BC Directors Qualification

Qualifications of Directors of British Columbia Companies

Every BC company must have at least one director.  A director is a person who has been appointed by the owners (shareholders) of the BC company to handle the business and affairs of the company on behalf of those owners.  Very often the directors of a BC company are also the owners, who have appointed themselves to the role of director. In order for a person to act as a director he or she must meet the qualifications of directors of British Columbia companies.

Is there any Limit on the Number of Directors a BC Company May Have

The Business Corporations Act (British Columbia) which governs BC companies provides that every private BC company must have at least one director and every public BC company must have a minimum of three directors, although all BC companies can have as many directors as they wish.

 

Persons Disqualified to Act as Directors of a BC Company

If the individual who wishes to act as a director of a BC company falls under any of the following restrictions that person cannot act as a director of a BC company:

  1. Is under the age of 18 years;
  2. Has been found by a court, in Canada or elsewhere, to be incapable of managing the individual’s own affairs;
  3. Is an undischarged bankrupt; or
  4. Has been convicted in or out of BC of an offence in connection with the promotion, formation or management of a corporation or unincorporated business, or of an offence involving fraud.

Section 124 of the Act does provide for some exemptions with respect to these restrictions for those who may be interested.

 

Resident Canadian Requirement Does not apply to Directors of BC Companies – Directors do not Need to Live in Canada

Many provinces and territories in Canada have a resident Canadian requirement which provides that a certain number of directors of a company must be “resident Canadians”.

The requirement for a director of a BC company to be a resident Canadian does not exist.  This is good news for Canadians who live abroad and wish to maintain a business in Canada.   It is also good news for those individuals who are living outside of Canada and wish to open a business in Canada but would not be able to move to Canada.

 

Does a BC Director Need to be a Shareholder

A BC director can be a shareholder but there is no legal requirement for him to hold shares in the company.

 

BC Directors Must Consent to Act

The BC incorporation statute provides that all directors must consent to act as directors of a BC company.  The directors of a BC company must consent either in advance of or at the same time of their election to the board.

Ontario Operating By-law

Ontario Operating By-Law – Enactment, Amendment and Repeal pursuant to the Business Corporations Act

What are by-laws?

By-laws are the rules pursuant to which a corporation conducts business.   Many of those rules will be the same as outlined in the statute governing the company.  However, in some cases the statute may provide that the by-laws can override certain standard statute provisions.  Ontario operating by-laws are the main rules for the corporation.

 

Ontario Operating By-law

The Ontario operating by-law is the first by-law to be enacted by a company upon incorporation and every company must have an operating by-law.   The rules outlined in the operating by-law are with respect to the number of directors, directors’ duties and meeting requirements, the appointment of officers and the rules relating to shareholders including meeting requirements, how many shareholders must be in attendance for it to be a valid meeting, etc.   These are just a few of the provisions outlined in a standard Ontario operating by-law.

 Section 116 of the Business Corporations Act (Ontario) provides the following statute requirements respecting Ontario by-laws for corporations:

“(1) Unless the articles, the by-laws or a unanimous shareholders agreement otherwise provide, the directors may, by resolution, make, amend or repeal any by-laws that regulate the business or affairs of a corporation.

(2)  Where the directors make, amend or repeal a by-law under subsection (1), they shall submit the by-law amendment or repeal to the shareholders at the next meeting of shareholders, and the shareholders may confirm, reject or amend the by-law, amendment or repeal.

(3)  Where a by-law is made, amended or repealed under subsection (1), the by-law, amendment or repeal is effective from the date of the resolution of the directors until it is confirmed, confirmed as amended or rejected by the shareholders under subsection (2) or until it ceases to be effective under subsection (4) and, where the by-law is confirmed or confirmed as amended, it continues in effect in the form in which it was so confirmed.

(4)  If a by-law or an amendment or repeal of a by-law is rejected by the shareholders, or if the directors do not submit the by-law, amendment or repeal to the shareholders as required under subsection (2), the by-law, amendment or repeal ceases to be effective on the date of such rejection or on the date of the meeting of shareholders at which it should have been submitted, as the case may be, and no subsequent resolution of the directors to make, amend or repeal a by-law having substantially the same purpose or effect is effective until it is confirmed or confirmed as amended by the shareholders.”

 

Amending or Repealing a By-Law

If the officers of an Ontario company wish to amend an Ontario operating by-law or another by-law, which has been approved by the directors and shareholders, the manner in which to approve the amendment to the by-law is to create a new by-law providing for the amendment.  For instance the officers will create a new by-law no. 2 which repeals all or certain sections of operating by-law no. 1, and includes the new replacement sections to be approved.  The officers would present by-law no. 2, being an amendment to by-law no. 1, to the directors for approval.  If the directors approve the by-law then the directors shall present the by-law to the shareholders for approval at the very next meeting of the shareholders.

 

Approving a By-law

When the directors approve a by-law it is said that the by-law has been “enacted by the directors” and the shareholders of the company are said to have “confirmed the by-law”.    All directors and shareholders of a corporation must have an opportunity to review the by-law and approve it for the by-law, amendment or repeal to be considered to be properly approved in accordance with the requirements under the Business Corporations Act (Ontario).

Need a By-law?  Purchase a Microsoft Word Version of By-law No. 1.
Ontario Operating Trade Names

Registration Requirements for Ontario Operating Trade Names

This article is about the requirement under the Business Names Act (Ontario) for a company to register under the Business Names Act when it operates under a name other than its corporate name – known as an Ontario operating trade name.

The statute indicates in section 2 that no corporation shall carry on business or identify itself to the public under a name other than its corporate name unless that name is registered by the corporation.

Register an Operating Trade Name

This legal requirement is frequently not followed correctly by small business corporations.  Let us take the example of a person who incorporates a company called Trewell Landscaping Inc.  He incorporates his company and wants to put a sign up on his door for the name “Trewell Landscaping”.

 

Trewell Landscaping - No Inc.

 

This is not the full name of the company and Trewell Landscaping Inc. is therefore operating under a name other than its corporate name and is in violation of the Business Names Act.

The owner of Trewell Landscaping thinks that because his corporate name and his business name are similar, that a registration is not required.  However, by virtue of the owner putting up a sign on his door called Trewell Landscaping he is in violation of the legal requirements under the Business Names Act.

 

The owner of Trewell Landscaping Inc. has two options.  He can register an operating trade name called “Trewell Landscaping” and obtain a Master Business License for this name.  This would mean that Trewell Landscaping Inc. would then be legally operating under the trade name “Trewell Landscaping” and the above sign is completely correct and legal.

 

If he does not wish to incur any further expense he can include the word “Inc.” at the end of the name “Trewell Landscaping” in very small letters after the name on his sign.

 

Trewell Landscaping Inc.

 

Resources for Canadian Business Owners would be glad to assist you If you require the registration of an Ontario operating trade name on behalf of your company to help you stay in compliance with the Ontario Business Names Act.

Below is an example of the Master Business Licence that is issued by the Ontario Ministry of Government Services when a company registers a business name.  This example illustrates how the name is registered without the “Inc.” in the name which allows the corporation to now operate under Trewell Landscaping.

 

Master Business License

BC Name Search Report

BC Name Search Report – Outline of BC Ministry Requirements for Business Names

The BC government has name granting procedures and policies that differ from some of the other provinces.  The BC government considers any similar BC name already registered and as well looks at the nature of business of the proposed business when granting names.  This article outlines some of those requirements and provides tips as to how to get a name approved and obtain a BC Name Search Report for a proposed business name registration.

 

Three Name Choices When Submitting a Request for a Proposed BC Name Search Report

The British Columbia Corporate Registry allows you to submit three proposed names for their review when requesting a BC Name Search Report. This is the only province that does this. It is very important to take advantage of this opportunity since the examiners have personal views and even though a name may appear to be clear, the examiner may feel it is not for a variety of reasons. If you give them three choices you will have a better chance of approval.

As indicated above, the examiners also consider the business purpose of a company as well when they make decisions on which names can be used for a BC business. It is not possible for you to determine which registered businesses have a similar business purpose to your proposed business name. It is therefore important to choose names that are distinct and different from all other names registered across Canada, regardless of the business purpose, and take advantage of the three choices option.

Why Use a Search House to Pre-Clear Your Names and Submit a Name Clearance Request to the BC Government on your Behalf

The BC Registry does have a free pre-clearance program in place. However, it is very limited and will not bring up all conflicts to any proposed names. If you use this service there is a very high chance that your proposed name will be rejected even if it appears to be clear because the BC name clearing program does not provide enough broad matches. The only way to do a broad pre-clearance of your proposed BC business name is to have a search house check the name through the NUANS system since it allows for broad matches.

A Canadian search house has access to all of the names registered across Canada. Not only will they be able to clear your name for use in BC, they will also be able to confirm that your proposed name can be used anywhere in Canada. Many businesses now conduct business right across Canada so it is important to pre-clear your name throughout. The BC government’s pre-clearance program does not search conflicts outside of British Columbia.

Single Word Names

The BC Ministry does not normally approve single word names. An example of a single word name for a company would be “Doe Inc.” or in the case of a business name, proprietorship name or partnership name, the word “Doe” would not be acceptable. The only time a single word name will be accepted for a proposed business is if the name is a coined name and it has been trademarked first.

Distinct Elements of a Name

The BC Ministry takes the distinct elements of a name very seriously when it considers whether a BC Reservation Report will be provided. Therefore, if you wish your name to be approved it is a good idea to following the name granting rules. There are three elements of a share company name and two elements for operating names, proprietorships and partnerships.

  • Distinctive Element – This element is the first one or two words of the name and it can be any noun, a street name, a city name, a coined name (which is a name that has been made up), a colour, an object, etc. The more different and distinct this element is will make it easier for you to obtain approval for your proposed name(s).
  • Descriptive Element – This element is in the middle of the name. It should describe the nature of business. The BC Ministry insists this element forms part of the name. An example might be online store, marina, knitting supplies, etc.
  • Legal Element – As indicated below, there must be a legal element at the end of a name for a BC company such as “Limited”, “Incorporated”, “Corporation”, “Ltd.”, “Inc.” or “Corp.” See a more detailed description of the requirements for legal elements under Corporate Designations for BC Business Names outlined below.[margin_10t][margin_10t]

 Special Characters

The BC Ministry recommends that the use of special characters for corporate and business names be avoided. Some characters are not recognizable by the system and may not be allowed because of that. The symbol for the cent sign is not allowed.  To avoid refusal to obtain a favourable BC Name Search Report it is best to avoid symbols.  Feel free to contact us if you wish to know if a particular symbol might be acceptable.

Legal Designations for BC Business Names

There are a number of different types of business registrations in the province of British Columbia and each one has to be set out in accordance with the statute requirements for that type of business. Below is a summary of the legal designations for the various types of business registrations:

BC Incorporated Company – The last word of the corporate name must have one of the following legal designations: “Limited”, “Incorporated” or “Corporation”. You can also use the short form versions of the words as follows: “Ltd.”, “Inc.” or “Corp.” If you are choosing a French name then the legal designation would need to be Limitee, Ltee., Incorporee, Inc. or Corp.

BC Partnerships and Sole Proprietorships do not have a legal ending such as Limited, Ltd., Incorporated, Inc. or Corp. however, they may use the following: Company or Co.

BC Cooperatives must use the word “Cooperative” in their name and may also use “Society”, “Union”, “Association” or “Exchange”.

BC Societies must have the designation “Association” or “Society” as the last word in the business name.

BC Limited Partnerships must use “Limited Partnership” at the end of the name.

BC Limited Liability Partnerships must use the words “Limited Liability Partnership” or “LLP” at the end of the business name.

BC Business Names Cannot Suggest a Government Connection

Certain words that may imply that the proposed business will be connected to the government are not accepted. Specifically the following words must be avoided: “government”, “ministry”, “bureau”, Secretariat”, “commission” or “certified”.

The use of the word “BC” or “British Columbia” as a distinctive part of the name (i.e. at the beginning of the proposed name) is considered in the eyes of the BC government to imply a connection to the government. In cases such as this, in order to use such a name you would need to obtain the approval of the government. You can, however, use these words at the end of a name and before the corporate designation (legal element) of the name. An example would be Veener Shipping of British Columbia Inc.

BC Business Names Must Not Suggest a Connection to the Crown

Any request for a BC Name Search Report for a proposed BC business name registration that implies any type of connection to the Royal Family or the Crown is not allowed including any reference to any living member of the Royal family, or endorsement by the Crown or Royal family. An example of this would be Prince Charles Coffee Shop Limited. You are allowed to use words that relate to places such as Prince George or Prince Rupert.

Using Personal Names in a BC Business Name

Personal names are allowed as part of incorporated BC companies. For instance, if you wish to use a name such as John Doe Inc. or Doe & Brown Inc. this would be acceptable.

Numbered Company Names

It is possible to register a numbered company with the province of BC. If you choose to do this the BC government will assign a specific number to your new incorporation. It will look similar to 999999 B.C. Ltd.

Number Names

Number names differ from a numbered BC company name. Numerals may be used in company names in the distinctive portion of the name (the first one or two words of a name). An example would be 13457 Enterprises Ltd. or Atlantic Enterprises (1998) Ltd.

 

Resources for Canadian Business Owners Inc. is a registered search house.