Do I need to hire a lawyer to incorporate my Ontario business? While it’s not required by law to hire a lawyer to incorporate, there are several benefits of retaining a lawyer.
Understanding Incorporation
Incorporation is the process of creating a corporation that is a separate legal entity from its owners. Incorporation means following the rules set out in the Business Corporations Act, which governs the formation and management of business corporations. This involves several legal and administrative steps, such as choosing a business name, filing the necessary documents with the government, creating the corporate structure and maintaining it.
The Role of a Lawyer in Incorporation
A corporate lawyer can help in multiple ways:
Reserving a Name For Your Company
A lawyer can assist with reserving a name for your company. Their guidance can facilitate the process in several ways:
- Ensuring Legal Compliance: A lawyer can help ensure that the chosen company name complies with all legal requirements. Different jurisdictions have specific rules about what can and cannot be included in a company name. For instance, certain words may be prohibited, or the name may need to include specific legal elements like “Inc.” or “Ltd.” A lawyer can guide you through these regulations to ensure compliance.
- Conducting Thorough Searches: Before reserving a name, you need to make sure it’s not already in use or too similar to existing names. This is more than just a quick check; it’s a search of the databases of registered company names. A lawyer can do a thorough search to minimize the risk of infringing on someone else’s name which could lead to legal disputes or a forced name change later.
- Guidance on Name Availability and Reservation Process: Lawyers can guide you through the process of name reservation, which can vary by jurisdiction. They can help with filling out and submitting the necessary.
Before submitting a name approval request, a lawyer will review the list of existing companies to determine if your desired names or similar ones have already been taken. If the lawyer believes that the Registrar will not approve your name choices, they may ask you to come up with other options. This helps save you time and money.
Strategic Guidance
A lawyer can offer guidance during the incorporation process, ensuring that the business structure aligns with the company’s long-term goals and needs. A lawyer will also anticipate legal risks and market opportunities and advise on compliance, risk management and flexibility. By combining legal guidance with strategic planning, a lawyer will create a solid legal foundation for future growth and prepare the business for success. A lawyer can provide tailored legal advice that addresses the specific business needs of the client, ensuring that the incorporation process aligns with their unique goals and challenges.
Draft and File Articles of Incorporation
To register your corporation, you must file a document called the Articles of Incorporation with the province of Ontario. A lawyer can draft these documents to suit your specific needs, ensure they are legally sound, and file them within the jurisdiction.
Create and Maintain Corporate Records and a Minute Book
A minute book is a record-keeping binder that corporations must maintain in compliance with the law and typically contains various documents.
- Articles of Incorporation
- Ledgers of directors, officers, shareholders and share transfers
- Minutes of Organizational Meetings
- Shareholders Register
- Notices and Resignation
- Share Certificates
- Corporate Bylaws
- Minutes of Shareholder and Director meetings
- Shareholder Agreements
- Resolutions
- Debt Obligations Ledger
- Copies of any forms filed with the government on behalf of the corporation
Maintaining an accurate Minute Book is necessary for corporations. Failure to do so can result in severe consequences, including the loss of corporate status and its associated benefits like limited liability for shareholders. Therefore, it is important to properly create and maintain the Minute Book to avoid such repercussions.
Draft Corporate Documents
A business lawyer can prepare and review the articles of incorporation, bylaws, shareholder agreements and resolutions so they are not only compliant with the law but also right for your business. This will help you identify and deal with potential legal issues before they arise and protect the business from future legal headaches. A lawyer will also clearly set out rights, responsibilities and procedures in these documents so you have a solid legal foundation for the business, and it will run smoothly and be governed well as the business grows and changes.
Risk Management
Incorporating with a lawyer will help manage risks and stability. A lawyer knows the legal requirements so they can identify and mitigate risks. They will advise on liability, ensure compliance with laws and regulations and develop strategies to protect assets. This proactive approach will mitigate potential legal issues and support long term growth and stability.
Time-Saving
While the incorporation process can be done without a lawyer, having professional assistance can save time and prevent mistakes that could lead to legal complications later.
Considerations for Small Business Owners
- Complexity of the Business: If your business structure is complex, involves multiple shareholders, or operates in a highly regulated industry, hiring a lawyer might be more prudent.
- Cost vs. Benefit: Weigh the cost of legal fees against your business situation’s potential risk and complexity.
- Long-Term Legal Needs: Consider whether you’ll require ongoing legal services. Establishing a relationship with a lawyer during incorporation might be beneficial for future legal needs.
- Time Savings: Incorporating with a lawyer is typically a time saver as you will not have to draft and file documents yourself.
- Legal Advice: Most lawyers offer brief consultation during the incorporation process, which will help set the business on the right path.
Summary
Incorporating a small business in Ontario doesn’t legally require a lawyer, but the decision to hire should be based on the specific needs and complexity of your business. There are benefits to incorporating, but there are drawbacks that you should be aware of. If you are uncertain about whether or not to incorporate or how to do it, it is advisable to seek advice from both legal and tax professionals. They can assist you in determining whether incorporation is the appropriate course of action for your business. While a lawyer can provide advice and peace of mind, simpler businesses might find the DIY approach or online services sufficient. Ultimately, the choice depends on balancing your business against the costs and benefits of professional legal assistance.
If you are searching for guidance from a Toronto Incorporation Lawyer, contact us and see how our firm can help you.
The information provided above is of a general nature and should not be considered legal advice. Every transaction or circumstance is unique, and obtaining specific legal advice is necessary to address your particular requirements. Therefore, if you have any legal questions, it is recommended that you consult with a lawyer.
