As your Quebec-based small business grows, you may wonder when is the ideal time to incorporate. Knowing how it may impact your business can help you make the right decision. Here we break down the top benefits of incorporating your business in Quebec.
Why incorporate your business?
Incorporating makes it easier to rapidly expand your business. You can hire employees, bring on investors and shareholders, and apply for funding not available to sole proprietorships. Incorporating also offers additional financial protection for business owners. As a sole proprietor, your personal assets are vulnerable to the risks of your business, whereas incorporating separates the business from the owner to limit your personal liability. Some industries pose a greater risk than others. For example, a construction business has a higher risk of workplace injury than an interior design business. The higher the risk that your company will face legal action, the more sense it makes to incorporate.
A corporation is its own entity that:
- Has rights and liabilities
- Can take legal action or have legal action taken against it
- Can own property
- Can sign contracts via its directors
- Exists separately from its shareholders
Incorporating federally vs provincially
Business owners should consider the jurisdiction in which they want to incorporate their enterprise. If the business operates from headquarters in Quebec, you can register your business federally or provincially in Quebec. Incorporating a business federally means that your enterprise will be regulated under the Canada Business Corporations Act and if you register your Quebec-based business provincially, it will be regulated under the Quebec Business Corporations Act. There are distinct benefits to consider for each.
Read Ownr’s article guide on how to choose between federal and provincial incorporation to help with your decision.
Benefits of incorporating federally in Quebec
- Increased name protection: If operating in other provinces and territories across Canada, your business will have increased name protection if incorporated federally
- Business headquarters: Your headquarters can be located anywhere in Canada as opposed to just within the province, as is the case for provincial incorporation.
- Lower fees for registration: The cost for federal incorporation is $200 CAD, plus $35 CAD for a NUANS name search report, as compared to $367 CAD for provincial incorporation in Quebec. It’s worth remembering that these filing costs won’t give you a fully incorporated business in good legal standing—you’ll likely incur additional costs having the necessary documents created in order to complete your incorporation.
Benefits of incorporating provincially in Quebec
- Name selection process: There is no NUANS name report required when incorporating provincially, which is needed for federal incorporation.
- Simplified registration process: Your business will automatically be registered with the Registraire des enterprises in one step upon constitution.
- Board of directors: There are no requirements to assign a board of directors. There are also no requirements for the origins of the board of directors, whereas for federally incorporated companies, at least one must be a Canadian resident (if less than four directors).
- Issuance of shares: There’s additional flexibility in the issuance of shared, including the ability to issue shares that are not fully paid, which can not be done when federally incorporated.
The process and cost to incorporate differs in each province and territory. Learn more about incorporation costs in Canada.
Benefits of incorporating your Quebec-based business
Limited liability for owners
When you incorporate your business, you significantly limit your personal liability as an owner. Your personal assets will be protected against creditors if the business goes bankrupt or if legal action is taken against the business.
Continuity of business existence
Once incorporated, a company becomes its own legal entity that can live on past the life of its owner, shareholders and board of directors. This provides more stability to the business, as it can live on with changed ownership.
Better access to capital
In general, corporations have access to more sources of capital than businesses operating as sole proprietorships. Corporations often have access to lower rates when taking out loans from financial institutions. Incorporating also makes your business eligible for grants and loans available to corporations, like many government funding options. You’ll also have the opportunity to raise venture capital by selling shares of the company or through private investors.
Tax benefits
By incorporating, you will most likely lower the amount of taxes you have to pay. Corporations are taxed at a lower rate than personal income. As the owner, you can draw a salary which is taxed under personal income tax rates. The remaining income earned through your business stays under your company’s name and is taxed under corporate rates. If operating your business as a sole proprietorship, all income is taxed at the personal tax rate.
Increased business credibility
Incorporated businesses are typically perceived as more official and professional than sole proprietorships. In some cases, depending on the sector (healthcare and consulting, for example), clients and other businesses may prefer or even be required to only work with incorporated enterprises.
Benefits of incorporating in Quebec
There are some considerations and benefits unique to operating a business in Quebec, whether constituted federally or provincially.
- Protection of the French language: Bill 96 under the Charter of the French Language offers increased protection to the French language within the province by introducing increased requirements for businesses that operate or have employees in Quebec. These requirements range from informing and serving customers in French to stricter French-language hiring practices.
- Ability to do business with French-speaking nations: A unique benefit to businesses within the province is the ability to easily conduct business with other French-speaking nations.
- Quebec tax benefits: Revenu Quebec offers tax deductions for small to medium businesses within the province to encourage the growth of small businesses.
Incorporating your Quebec business with Ownr
Many people believe that going directly to the government is the cheapest option when it comes to incorporation. The reality is that the government isn’t actually going to complete your incorporation. Once the government processing is complete, you’ll still need to hire someone to prepare important legal documents that structure your corporation. When you incorporate with Ownr, you’ll receive all of the documents you need for a legally compliant business as part of your package.
Ownr takes the guesswork (not to mention the tedious paperwork!) out of incorporating. Incorporate your business in less than 15 minutes, with provincial incorporation packages from $699. By incorporating with Ownr, you’ll also receive:
- A full year of our Online Minute Book plan
- Company name registration
- Company organization documents & share issuances
- Access to Ownr Perks
How to incorporate a business in Quebec
Determine a name: As a business owner, you can select a unique business name or be assigned a numeric designation. If you’d like to reserve your corporation’s name in advance of filing, you have the option of doing so with the Registraire.
File necessary documentation: You will need to prepare and file several documents containing important information about your business. This will include an article of incorporation and initial declaration.
Pay appropriate fees: The hardest work is nearly done and now it’s time to pay the processing fees for your application. The fee for incorporation is $200 CAD for federal incorporation (plus $35 CAD for a NUANS name search report) and $367 CAD for provincial incorporation.
Obtain certification and NEQ: If your documentation is in order and all fees have been paid, you will receive your article of incorporation and NEQ number. If registering your business federally, you can now register with Registraire du Quebec. If incorporating provincially, your business will be automatically registered.
Maintain ongoing documentation: Now that you’ve incorporated your business, you can apply for your tax numbers and prepare your minute book.
Other factors to consider
It’s important to keep up-to-date on the additional documentation needed to keep your business operational and in good standing. Each year you’ll need to file an annual updating declaration and pay the registration fee to continue operations.
Benefits of incorporating in Quebec FAQs
Should you incorporate federally or provincially in Quebec?
If you plan to do business under your enterprise name across the country, it will be beneficial to incorporate federally to protect that business name nationwide. Otherwise, your business name will not be protected or considered unique in other provinces and territories, should your business expands.
How much does it cost to incorporate in Quebec?
Federal: The fee for federal incorporation in Quebec is $200 CAD, plus a name search report fee of $35 CAD.
Provincial: The fee for provincial incorporation in Quebec is $367 CAD. There is an additional cost for name search services, though this is not mandatory.
Don’t forget, there may still be additional fees to create all of the legal documents required for your corporation.
Do I need to incorporate in Quebec?
If you want access to preferred tax and funding options, and to decrease your personal liability as a business owner, incorporating your business is generally recommended.
Think incorporation is right for your small business? Read Ownr’s guide that breaks down everything you need to know about incorporating in Quebec. Ready to get started right now?
This article offers general information only, is current as of the date of publication, and is not intended as legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. While the information presented is believed to be factual and current, its accuracy is not guaranteed and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author(s) as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by RBC Ventures Inc. or its affiliates.