Choosing A Name

Choosing a Name for Your Canadian Corporation, Partnership or Sole Proprietorship

When choosing a name for your Canadian corporation, partnership or sole proprietorship you need to ensure that your name is distinct and different from any other registration on file federally and in all provinces and territories across Canada. In order to determine this you will need to perform a preliminary name search. Before performing a preliminary name search you should read the following information.

 

Aspects Required When Choosing a Name for Your Business

If you are registering a corporation, you will be required to have a legal element (explained below) but for other registrations such as sole proprietorships, business names and partnerships this will not be necessary. The information herein explains what to look for when using a name for a corporation however the principles can be applied to business names, partnerships and sole proprietorships as well.

When deciding on a name for your corporation, you should consider three aspects of the name as follows:

(1) the Distinctive Element

(2) the Descriptive Element, and

(3) the Legal Element.

 

  • Distinctive Element

  • Vancouver

  • Dominique's

  • Butterwind

  • Descriptive Element

  • Lawn Mowing Services

  • Graphics Design

  • Wind Surfing Instruction

  • Legal Element

  • Ltd.

  • Corp.

  • Inc.

 

Distinctive Element of a Name – If the name you choose to register is “Crosgrey Carpentry Inc. , the distinctive element is the word “Crosgrey”, which is distinctive because it is my last name. Another example of a distinctive element in a name might be “Grenville” as in “Grenville Garden Supplies Ltd.” which is distinctive because it describes a location. “Starcross Dental Services Corp.” has the distinctive word “Starcross” in it to make it stand out from other dental service companies.

Descriptive Element of a Name – The descriptive element describes the type of business. In “Crosgrey Carpentry Inc.”, the descriptive element is “Carpentry” which describes the nature of business. In “Grenville Garden Supplies Ltd.” the descriptive element is “Garden Supplies” which describes the type of products this business sells. “Dental Services” is the descriptive element for “Starcross Dental Services Corp.”.

If you were to use the name “Starcross Ltd.” it does not describe the type of business. You can incorporate this company, if the name is available, but because it is such a short name there may already be a conflict and it would not be suggested to register such a short name. There are 1,000s of these short names registered already and most of them are already taken. Let us consider that “Starcross Inc.” has been registered. When you do a preliminary name search on the name “Starcross Ltd.” the name search report says “Starcross Ltd.” is available. This would still be a very poor choice of name since the person who owns the company registered as “Starcross Inc.” would consider your name as a conflict even though the government in some jurisdictions would allow you to register the name because it is different and not exactly the same. The onus is on you to ensure your name is distinct and different from others, not the government. In fact in some provinces such as Alberta and Ontario you can register a business name, sole proprietorship or partnership with the exact name as other registrations. This is not a requirement for them so if you do not pre-clear your name in advance they will not inform you before registering of any other names that would be a conflict. The only requirements in those provinces for distinct names would be for incorporations.

Purchase NUANS or Name Search Report for a New Business

It is best to have a descriptive element in the name to avoid any future conflicts that you may not be aware of when you register your company especially if you are performing your own searches without the help of a search house. Search houses are trained to look for conflicts such as this and it is your best option to have a search house check your name. For the low cost it is worth being safe. You could be forced to change your name if a company took you to court for this issue. If they have had use of their name for many years and are highly placed in the marketplace, they might be able to force you to change your corporation’s name. This would then mean that, even though you have built up a relationship with your clients using the name you first chose, you might be forced to change it and thereby lose some of your standing in the marketplace. The loss of income and the additional expenses resulting from such a situation could be high. Therefore, it is important your corporation’s name is very distinct and different from other names of existing companies across Canada. This would include any companies registered in Canada whose home base is outside of Canada. As well, never order stationery, business cards, etc. before your company is incorporated.

Legal Element of a Name – The Legal Element is the word “Inc.” which is a mandatory ending which recognizes the name as the name of a company. In Canada you can have the following endings for your company name: “Inc.”, “Incorporated”, “Ltd.”, “Limited”, “Corp.”, “Corporation” and the French equivalents of “Ltee.” “Limitee”, “Inc.” (same in English and French) or “Incorporee”, The Legal Element distinguishes your name as a share corporation rather than a business name, sole proprietorship or non-share corporation.

It is best to consider a name that has a minimum of four words. Otherwise, you may choose a name that is too close to another existing corporation’s name.

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Preliminary Name Searches

You should always do a preliminary name search prior to obtaining a name search report or a NUANS name search report.

The distinctive element of a name can be your name, i.e. “John Smith” or it might be a group of letters, i.e. “GSA” or it might be the name of a town, “Newmarket”, etc. The more distinct the name, the more likely it will be that the name will be available for use.

The descriptive element of the name should be very broad and detailed. The more detailed your descriptive element is the more likely your name will be different than others. For instance, using the descriptive element “Services” is vague but the use of the descriptive element “Dry Cleaning Services” is broader. The descriptive element “Dry Cleaning and Clothing Repair Services” would be even better.

Choosing a Name for a Quebec Company

If you are going to carry on business in Quebec then you will need a French name,. The name can be the name of the company or an English named company with a French business name. If you chose you can have an English and a French name in your articles. You will need two NUANS reports when incorporating. One for the English version of the name and one for the French version of the name.

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.