Incorporating in Alberta: Provincial or Federal, and What Follows

Incorporating creates a separate legal person that can own property, sign contracts, sue, and be sued in its own name. For many Edmonton business owners the appeal is limited liability, since shareholders are generally not personally responsible for the corporation's debts. Incorporation can also bring tax planning advantages and makes it far easier to bring in partners or investors. It is not free of cost or obligation, though, and a corporation that is set up and then neglected can create more problems than it solves.

The first real decision is whether to incorporate provincially under the Alberta Business Corporations Act or federally under the Canada Business Corporations Act. Both produce a valid corporation that can operate in Alberta, and both are used by successful businesses of every size. The right answer depends on where you plan to operate, how important nationwide name protection is, who your directors will be, and how much administrative overhead you are willing to carry each year.

Alberta or Federal Incorporation: How They Compare

An Alberta corporation is registered with the provincial corporate registry through an authorised service provider, and its name is protected within Alberta. A federal corporation is registered with Corporations Canada and receives stronger name protection across the country, but it must still register extraprovincially in each province where it carries on business, including Alberta. That extra registration means additional fees and an additional annual filing. Federal incorporation is often chosen by businesses that operate in several provinces or that value the national name protection.

• Director residency: federal corporations generally require a proportion of directors to be resident Canadians, while Alberta removed its residency requirement.
• Name protection: federal names are screened nationally, Alberta names are protected provincially.
• Filings: an Alberta corporation files an annual return each year, and a federal corporation files both a federal annual return and an extraprovincial registration renewal.
• Cost: incorporating and maintaining an Alberta corporation is usually simpler and less expensive if you operate only in Alberta.
• Perception: some clients and lenders outside Alberta view a federal corporation as more established, though the legal substance is similar.

What Incorporation Actually Involves

To incorporate in Alberta with a word name you need a NUANS report, which searches existing corporate names and trademarks for conflicts and is valid for a limited period. You then file articles of incorporation, a notice of address, and a notice of directors. Alternatively you can take a numbered company and register a trade name for public use. The articles set out your share structure, and getting that structure right at the start is much easier than reorganising it later once value has accumulated in the company.

Share structure and shareholder agreements

Share structure determines who controls the corporation, who receives dividends, and how flexibly profits can be distributed. Even a single owner business benefits from a considered structure rather than a single class of common shares issued by default. Where there is more than one owner, a unanimous shareholder agreement is essential. It sets out how decisions are made, what happens if an owner wants out, dies, becomes disabled, or divorces, and how the shares are valued. Negotiating that while everyone is on good terms is far cheaper than litigating later.

The Work That Begins the Day After Incorporation

A certificate of incorporation is the beginning, not the end. The corporation needs organisational resolutions appointing directors and officers, adopting bylaws, issuing shares, and appointing an accountant. Those records belong in a minute book kept at the records office, and they must be updated whenever something changes. Alberta and federal law also require most private corporations to maintain a register of individuals with significant control, identifying the people who ultimately own or control the company. Registry authorities take these obligations seriously.

1. 1 Obtain a business number from the Canada Revenue Agency.
2. 2 Register for GST once your revenue crosses the small supplier threshold, or voluntarily before then.
3. 3 Open payroll and import or export accounts if you will need them.
4. 4 Set up a corporate bank account, since mixing personal and corporate funds undermines the separation you paid for.
5. 5 Register with the Workers Compensation Board and obtain any municipal business licence required in Edmonton.

Keeping the Corporation in Good Standing

Corporations must file an annual return with the registry, which is a corporate filing and is separate from a tax return. Missing it repeatedly can lead to the corporation being struck from the register, which creates serious problems with banks, contracts, and title to property. Alberta also administers its own corporate income tax, so an Alberta corporation generally files both a federal corporate tax return and an Alberta return. Keeping the minute book current, filing on time, and reviewing the structure annually with your advisors prevents most avoidable problems.