Incorporation Questions

6 Key Questions to Ask Before Incorporating a Business

By David van Moorsel

We’ve spent the past decade helping entrepreneurs to incorporate and set up their small businesses. Over that time, we’ve identified 6 key questions that most business owners ask, or wish they had asked, prior to incorporating.

In this post we’ll review those questions and provide some answers. Taking a few minutes now to consider these issues could save you time, money, and stress down the road.

1. Should I Incorporate My Business?

This is the most common question we receive, and the answer depends on several factors unique to your situation:

  • Are you in business alone or with others? If you have multiple owners, incorporation becomes more important for defining ownership rights, responsibilities, and protecting each owner’s interests.
  • What is the degree of risk? If your business operations carry significant risk (e.g., construction, oil and gas, professional services), incorporation provides a layer of liability protection for your personal assets.
  • Will your business have employees? Operating with employees increases your exposure to liability. Incorporation helps protect owners from claims related to employee actions.
  • How much income do you expect? The higher the value of the business and its income, the more important it is to have proper legal protections in place.
  • Is your business brand important? Incorporation protects your business name within your jurisdiction. No other corporation can register the same name.
  • Do you plan to sell or transfer the business? Incorporation provides significantly more options for transferring ownership or selling the business in the future.

If you’re still unsure, we recommend taking our Incorporation Quiz or booking a consultation with an Alberta business lawyer.

2. Federal or Provincial Incorporation?

The main difference between a federal and provincial (Alberta) corporation is the scope of name protection:

  • Provincial (Alberta): Your business name is protected within Alberta only. Registration is through Alberta Corporate Registries.
  • Federal: Your business name is protected across all of Canada. Registration is through Corporations Canada. However, you will still need to register extra-provincially in each province where you carry on business.

For most small businesses operating primarily in Alberta, a provincial incorporation is sufficient and more cost-effective. If you plan to operate across multiple provinces or want Canada-wide name protection, federal incorporation may be the better choice.

3. What Should I Name My Corporation?

Your corporate name is important and choosing the wrong one can be costly. Consider the following:

  • Availability: Make sure no other corporation is already using the name. A NUANS name search can help determine this.
  • Restrictions: Certain words are restricted and may require government approval or special qualifications.
  • Future-proofing: Choose a name that won’t limit your business as it grows and evolves.
  • Numbered vs. Named: You can incorporate with a numbered company (e.g., “1234567 Alberta Ltd.”) if you don’t want to commit to a name right away. You can always add a name later.

4. How Should I Structure My Shares?

Share structure is one of the most commonly overlooked aspects of incorporation, and one of the most expensive to fix later. Key considerations include:

  • Classes of shares: Different classes can provide flexibility for tax planning, income splitting, and different levels of control.
  • Voting rights: Consider who should have voting control over the corporation’s decisions.
  • Future investors: If you plan to bring in investors or partners later, your share structure needs to accommodate this.

We strongly recommend getting legal advice on your share structure before incorporating. A few hundred dollars spent now can save thousands in restructuring costs later.

5. Who Should Be the Directors and Officers?

Directors and officers have specific legal responsibilities and potential personal liabilities:

  • Directors are responsible for managing the affairs of the corporation and owe fiduciary duties. They can be personally liable for certain obligations including employee wages and source deductions.
  • Officers handle day-to-day operations as appointed by the directors.
  • Residency requirements: For Alberta corporations, there is no requirement for directors to be Canadian residents. For federal corporations, at least 25% of directors must be Canadian residents.

Choose your directors carefully, as their role carries real legal responsibilities.

6. What Do I Need to Do After Incorporation?

Many business owners think that once they have a Certificate of Incorporation, they’re done. In reality, incorporation is just the first step. After registering, you will also need to:

  • Issue shares to the shareholders
  • Appoint directors and officers
  • Prepare organizational resolutions
  • Create a corporate minute book with all required records
  • Set up a corporate bank account
  • Register for GST/HST if applicable
  • Obtain business licenses and permits
  • Set up proper accounting and bookkeeping
  • File annual returns to keep the corporation in good standing

Failing to complete these steps can lead to significant problems down the road. That’s why all of our incorporation packages include comprehensive legal documents and 1 year of legal support — so your corporation is properly set up and maintained from the start.

Have more questions about incorporating a business in Alberta? Book a consultation with an Alberta business lawyer, or get started with your incorporation today.

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