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The Hidden Expenses of a ‘Cheap Incorporation’

Money can be tight for a new business. As an entrepreneur you’re always looking to cut unnecessary costs. This starts on the day you set out to incorporate your business. You’ll see a range of costs and might be tempted to go for the lowest price available. This article will give you a view of the upfront and ongoing costs associated with incorporating. What you’ll find is that the lowest price on day one is probably going to cost you even more in the future. By skipping some of the key legal requirements at the start, you’ll pay even more down the road.  

But let’s clarify one thing right from the start: There’s no such thing as a free incorporation. No matter where you live, the government always charges a fee to submit your incorporation documents and reserve a name. So if you see ads for “free” incorporation, there will be plenty of hidden costs once you see the fine print.

Cheap incorporation still comes at a cost

So, now that you know incorporating will never be free, why not go for the cheapest option? The problem with the cheapest option is that you’re only going to receive half of what is required to properly incorporate. You will get your incorporation documents processed by the government but a cheap incorporation won’t include all the documents that structure and organize your business.

Think of incorporating as a two-step process. First you need to register your new company with the government. But incorporating doesn’t end there. After you’ve registered with the government, your corporation needs documents that record who owns and controls the company. Even if you’re a solo entrepreneur incorporating your own business, you still need minute book documents.

These documents include things like bylaws, shareholder and director resolutions, director consents, and share issuances. These documents are legally required for every corporation in Canada, and when you pay for a cheap incorporation you won’t be receiving them.

So I won’t get all my documents with a cheap incorporation. Does it really matter?

A cheap incorporation is an incomplete incorporation. At some point, you will need to prove who owns your company. Whether you’re getting a loan, selling the business, or bringing on an investor, you will be asked to produce your Minute Book. You won’t even be able to receive a dividend as an owner of your company. It will be an awkward moment when you can’t produce the required legal documents that you were supposed to receive when incorporating.

Of course, you can always call a lawyer to clean up your corporation in the future. But the cost of an experienced business lawyer is often over $500/hour, and it can be complicated to generate Minute Book Documents when a company wasn’t properly organized at the time of incorporation. So whatever you saved by getting a cheap incorporation, you’ll end up paying far more down the road.

With a cheap incorporation, there’s also a higher possibility of getting something wrong from the start. A cheap incorporation will have very few options for how the company can be structured.

For example:

  • Do you want to have voting shares and non-voting shares?
  • Do you want to have a board or directors, or just a single director?
  • Do you want to appoint multiple officer positions: President, Secretary, CEO?

These things require careful consideration before incorporating, and a cheap incorporation won’t give you the option to customize your corporation. One size doesn’t fit all when it comes to incorporating, so a cheap incorporation won’t give you the options that suit you best.

Affordable, complete, and accurate incorporation with Ownr

A cheap incorporation will end up costing you a lot more in the long term. But there are options to get incorporated correctly on a limited budget. With Ownr you can get properly incorporated in under 20 minutes and manage your company’s ongoing legal need online.

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