Simple way to understand Corporations in Canada

A corporation in Canada is its own legal entity, which separates it from its shareholders. It has its own rights and obligations. Also, it enjoys certain benefits such as different tax calculations and deductions. When you are ready to set up a corporation, you need to fill out articles of incorporation at the federal or province level.

The company name you choose must be unique, as per the incorporation law. Once you have successfully registered as an incorporated company, the shareholders have a choice to select the director(s) to look after their business.

You can incorporate the company in different ways, depending on the type of business you embrace.

• For-profit. As the name suggests, these companies have a vested interest in making profits with their day-to-day operations and activities.
• Not-for-profit. This type of organization has social objectives and does not earn a profit for shareholders. Earned income is redistributed for the betterment of the organizational goals.
• A cooperative organization can be created under the Canada Cooperatives Act. The objective is to help its members socially and economically and earn some profits to sustain it for future growth.

There are different types of business corporations in Canada that can be set up, depending on the nature of the business.

Canadian-Controlled Private Corporation (CCPC)

As the name suggests, this organization must be private and consists of shareholders and director(s). To get it registered, the company must meet the conditions laid down by Canada Corporation.

Let’s learn about some of those.

• Corporations that are a resident of Canada and were either incorporated as residents in Canada from June 18, 1971, until the end of the tax year.
• Either directly or indirectly, one or more non-resident persons are not in control of a corporation.
• It is not controlled directly or indirectly by one or more public corporations, other than a prescribed venture capital corporation.
• It is not controlled by a Canadian resident corporation that lists its shares on a designated stock exchange outside of Canada.
• It ensures no class of its shares of capital stock are listed on a designated stock exchange, for instance, the Toronto Stock Exchange.

A change in the share of ownership can possibly affect the corporation and can be assessed to be ceased as CCPC if it is not done as per the rules laid down.

The CCPC is one of the most advantageous forms of small business from a tax standpoint for its owner. In addition to the small business tax deduction, you can avail yourself of investment tax credits, exemptions from capital gains for the sale of shares and tax credits for research and development.

Canada Public Corporation

Shares that are listed on the Canadian stock market are defined as a public corporation and are regulated by its body.

Other Corporation

As you can imagine, a corporation that doesn't belong to the above categories is termed as an “other corporation”.

How to Register a Corporation

Before you start the process of registration, it is suggested you have the following things handy.

• Type of corporation you would like to register.
• Name search is completed, and you have a final name with you.
• Shareholder information.
• Business details.
• Nominal fees, as specified by the Canada Corporation authority.

You can visit the Canada Corporation website at www.ic.gc.ca ,or you can approach your province office. Another alternative is to contact private law firms.