A step-by-step guide on how to incorporate a small business in Alberta.

Jean Chung

Jean Chung

MBA, CGA, CPA

Do you need to incorporate a small business? We have created this step-by-step guide to make it easier for entrepreneurs to incorporate their small businesses in Alberta. If you are planning to start your business, one of the most important decisions you will be facing is to decide the type of business that you want to operate. 

As daunting as it seems, starting a new venture is not for everyone. It is not for the faint of heart. There are many factors that come into play when starting a business, and some of them are more complex than others. If you want to have a successful business launch, you need to be aware of them. In one of our previous articles, we looked at what we believe to be the top 12 business tips for starting a business.

Starting a business is such an amazing accomplishment in itself. Many people have business ideas, or at least what they think are business ideas, but they never start a business.  One can also make all kinds of excuses not to start a business. If you have just started your entrepreneurial journey, one of your next decisions is to decide what type of business structure you need to have for your new venture.  

What are the different business structures?

There are essentially three main types of business structures that you can choose from: a sole proprietorship, a partnership, or a corporation. A sole proprietorship is an unincorporated business owned by one individual, making it the simplest form of business to start and operate. It is a type of business where there is no distinction between yourself and your business. It is not a legal entity. You are responsible for your business and its debt. So it is quite simple to start, but the downside is that you are personally responsible for your business.

A partnership is an agreement or arrangement between multiple people (business partners) to take part in a business and share its profits. In a partnership, partners share liabilities as well. Sometimes, the liabilities are limited, and this type of partnership is called a limited liability partnership (LLP). The partners are not personally liable for the debt of the partnership. 

The third type of business structure that we are going to examine in this article is a corporation. It is a type of business entity that is distinct and separate from its owners. The corporation has the same rights and responsibilities as an individual. It can enter into contracts, pay taxes, hire people, and get sued as well. The major benefit of a corporation is that it provides a shield to its owners if the business goes into debt. It limits the liabilities to what the owners have invested in the business. The owners’ personal assets are protected. It is one of the principal reasons among a few that business owners choose this type of structure. Let’s take a look at how to set up a corporation in Alberta.

Come Up with a Business Name

The first thing that you should do before you incorporate a small business is to look for a business name. Make sure that the name you have chosen is not a name that has already been taken. Do a Google search and see if the name pops up or not. It is always a good idea to have two or three names in mind in case the first name has already been taken. Choose a name that will represent your business and your brand well. Most importantly, choose a name that people can remember!

What should your name look like? In Alberta, a corporation’s name comprises three elements: distinctive, descriptive, and legal.

The distinctive name makes your business different from others, and it can be a unique word or location. An example would be “Calgary.”

The descriptive element of the name is one that describes what your business does. If your business does roofing repairs, then the descriptive part of the name can be “Roofing Repairs.”

And the last element of your business name most commonly ends with “Corp”, “Ltd” or “Inc”. A business name that ends with these three words signifies that the owner of the business has limited liability. The owner of the business is not personally liable for any suit against the business. In our example, if we incorporate the repair roofing business, it could look something like “Calgary Roofing Repair Corp.”

Do A NUANS Search

The second most important step before registering a small business is to get a NUANS report to make sure that there is no other corporation with an identical name or a name that is too similar to your proposed corporation name. It’s always a good idea to have a second proposed name just in case the first one is taken.

For corporations, it is not allowed for two corporations to have identical names. If that was the case, imagine the confusion that it will create in the minds of consumers, even if the two businesses were not in the same city.

The registry can reserve the proposed name for 90 days and have to be submitted with the incorporation details for registration. If your proposed name is too similar to that of another corporation, you can face an objection from their owners, and eventually, forced to change your corporation’s name, if the appeal is accepted. If you want exclusive rights on your corporate name, you need to register a brand name.

You do not need a NUANS report if you are going to register a number name company. One such company can be “786564 Alberta Ltd.” With a numbered corporation, the term “Alberta” is always used as the second part of the name, whereas the number portion of the name is assigned by Corporate Registry.

What are your options? DIY or hire a lawyer.

If you decide to incorporate a small business, there are essentially two options available to you. Either you do it yourself or you hire a lawyer.

So how can you do it on your own? You can either register your small business at a local registry or you can choose an online service provider that can do it for you. You can google “Alberta business registration” and a few of them will pop up.

The major benefit of incorporating your business on your own is that it is a lot cheaper than hiring a lawyer. If you decide to do it on your own, it will cost you a little more than $500 if you go with a corporate named business. There is a government fee of $275 and a cost of $50 for the NUANS search. The registry office throughout Alberta also charges an administrative fee of $250. So the total cost of incorporation is about $575. We encourage you to shop around as the NUANS and administration fees vary from one local registry to the next.

If you have an incorporated name, you have to complete a NUANS search unless you have a numbered corporation. Name searches can be done on the same day that you register your small business, depending on the time of day the search is requested. Once the forms and registration forms are completed properly, most business registrations can be completed on the same day.

If you decide to hire a lawyer, it can be anywhere from $1000 to $2000. So if money is an issue when you start and you are the only shareholder in your business, it is probably better to do it on your own. However, if you have several shareholders in your corporation. It might make more sense to hire a lawyer if you need to set up distinct classes of shares. For example, set up voting and non-voting shares or preference shares. If you do the registration on your own, you are stuck with a single class of shares.

When you successfully register a business on your own, the registry will provide you with the Certificate of Incorporation, the Articles of Incorporation, and the Incorporate Alberta Corporation – Registration Statement. However, some registries provide you with an add-on to the basic package where you are provided with a binder that will include the company name, by-laws, director resolutions, shareholder resolutions, consents, director registers, share transfers, share registers, printed share certificates. All the information will be filled in for you and all the proper documents will be inserted in your minute books.  

These documents are required by law and you need to make sure that you have them. They will also be needed if you apply for a loan from your bank for them to verify that the corporation is authorized to borrow. In case you sell your business, your potential buyer may also ask for the minute books. 

What is the difference between Provincial and Federal registration?

In Canada, you are allowed to incorporate a small business federally or provincially. If you choose the Federal option, you will still need to register your small business extra-provincially in Alberta if you are going to conduct business in that province. Both types of incorporation allow you to conduct business in all provinces as well.

The key difference between the two is that an Alberta-registered corporation is governed by the Alberta Business Corporations Act and a Federally registered corporation is legislated by the Canada Business Corporations Act. With the former, the corporation name is registered at the provincial level, and in the latter case, it is registered nationally. The Federal registration gives you more recognition if you do business at the international level.  Also, with the federal corporation, your business name is protected across all provinces; with the provincial corporation, it is only protected in the province of incorporation.

There is more paperwork involved with the Federally registered corporation as the Alberta extra-provincial annual return has to be filed. With the Alberta-registered corporation, only the annual return for Alberta has to be filed. So definitely the cost of doing return for the federally registered corporation will be more than the Alberta-registered one. 

The annual return fee at the federal level and the provincial levels are $12 and $70, respectively. If you fail to file the corporate annual return for two-and-a-half years in Alberta, the registry will assume that you are no longer in business and will dissolve the corporation.

If you register your business federally, the cost for incorporation is $213, including the NUANS search fee. However, federal registration will also involve another government fee to register extra-provincially for approximately $275. Not to forget the administration fee of about $225. So the total cost of registration at the Federal level will be about $700 if you choose the DIY route. There will be no NUANS search fee when you register at the provincial level since your corporate name is already in the federal database.

What if your corporation is out-of-province?

If a corporation was founded in another province or country, it must be registered to do business in Alberta. Your business is deemed to carry business in Alberta if it solicits business in Alberta, is listed in an Alberta directory, has a sales representative, warehouse, or office in Alberta, or owns land in Alberta.

Corporations that are originally incorporated in British Columbia, Manitoba or Saskatchewan, can be registered using Alberta’s Online Extra-provincial Registration. This is part of the New West Partnership Agreement that came into effect July 1, 2010, and fully implemented since July 1, 2013. It is a streamlined process and there is no cost to register. However, there is a NUANS fee, charged by the Registry.

If your corporation was originally registered in another province other than the four listed above, and you want to do business in Alberta, then you will need to have it registered in Alberta.  You cannot do the registration online through the Alberta Online Extra-provincial registration portal. There are additional fees involved, including a registration fee, an administration fee, and a NUANS fee.

In order to register an out-of-province corporation in Alberta, you will need to get a NUANS report. Again, the idea is to make sure that there is no identical name between your out-of-province corporation with other corporations listed on the report. However, if your out-of-province corporation is a numbered corporation, there is no need to have a NUANS report. The NUANS report will reserve the proposed name for 90 days to register.

You will need to nominate a legal representative to represent your out-of-province corporation. A lawyer or accountant could take care of that for you. At the time of registration, proper supporting documents (statute, memorandum of association, certificate of incorporation, etc.) have to be provided to prove the current status of your corporation (as certified by a notary or government representative).

What if it is a professional corporation?

If you are a doctor, a dentist, a veterinarian, a lawyer, an accountant, an architect, and an engineer, and you want to practice through a business, then you have to incorporate as a professional corporation. A professional corporation is simply a corporation that provides professional services to the public. 

These professions are governed by a provincial professional body or association such as CPA Alberta, the Law Society of Alberta, the College of Physicians & Surgeons of Alberta, and the rules differ slightly across provinces. When you incorporate your business as a professional corporation, the name of your business will end up with the term “Professional Corporation.” Each one of these professional bodies will have their own requirements.

Liability for a professional corporation is slightly different from other corporations. It is almost a requirement to have the necessary insurance coverage in place if you are going to operate a professional corporation because of the risks involved. If you are a surgeon and you get sued for malpractice, you want to make sure that you have the right insurance coverage. Your corporation will only protect you against creditors, but not against malpractice.

Professional corporations are also restricted in terms of who can become shareholders. The professional bodies and associations are the ones setting the rules around shareholding. Before you nominate any shareholder for your professional corporation, you better check with your governing body first to learn the rules.

Before you decide to incorporate your small business, please make sure that you know all the steps and legal ramifications involved in incorporation, based on your unique situation. If you need help, do not hesitate to seek legal advice. 

Disclaimer:

The information in this blog is not intended to provide legal, accounting, or tax advice. It is intended for informational purposes only. You should obtain professional advice from your accountant or lawyer before acting on any information in this blog.