This guide provides a short summary of the steps required to incorporate a new business in Nova Scotia under the Nova Scotia Business Corporation Act, as well as items to consider to determine whether it is the right time for your business to incorporate. If you have questions about incorporation, feel free to write us: [email protected]
Business Corporations are incorporated in Nova Scotia, according to the provisions of the Nova Scotia Business Corporation Act with the Nova Scotia Corporations Division. Company Formations Canada provides fast and easy Nova Scotia Incorporation Service and provides all the documents your new Nova Scotia corporation will need to stay up-to-date and in compliance with the Nova Scotia Business Corporation Act.
Why should I incorporate?
One of the most frequently asked questions by entrepreneurs starting a new business is: “Should I incorporate?” The answer to this question is usually: “That depends on your particular situation and your particular needs.” Among the factors to consider in making these decisions are the benefits of incorporating (versus operating the business as a sole proprietorship or partnership) and the implications that incorporation may have for the business.
Benefits of incorporating
Separate legal entity
Limited liability
Lower corporate tax rates
Greater access to capital
Continuous existence
The two main benefits of incorporation are the limited liability and tax advantages.
Limited Liability.
By incorporating a new company in Nova Scotia, you will separate your personal and business obligations. Therefore, if your company goes south, your personal assets will remain protected and untouched. It is important to remember that directors of corporations may remain on the hook for unpaid employees’ wages in specific instances. This is different than if you remained a sole proprietor or a general partner in a partnership, as you would remain personally responsible for the debts of the business
Tax advantages.
Nova Scotia Corporations are taxed differently than individuals. Generally, tax rates for Nova Scotia corporations are lower than tax rates for individuals. Also, Nova Scotia corporations are subject to flat rates of tax, where individuals are taxed on a progressive basis.
Additional benefits include:
Raising Money.
It is easier to raise money from investors as incorporated businesses can sell shares.
Transferable.
Incorporated companies can be transferred amongst individuals by simply selling shares and succession planning is considerably easier.
Continuous lifespan.
Corporations are not limited to the lifespan of the owners. They can exist indefinitely.
Drawbacks of Incorporation
The primary drawback from incorporation is the added expense. There will be the initial cost to incorporate your company as well as ongoing accounting and annual filing costs.
Also, a corporation requires additional ongoing paperwork and record keeping. For example, each year, you will need to file an Annual Return and prepare accompanying resolutions.
Where to Incorporate: Federal v. Provincial
In Canada, you have the option of incorporating provincially or federally. If you choose Federal, you’ll also need to extra-provincially register the company in Nova Scotia.
The differences between incorporating provincially or federally are often exaggerated. Both allow the company to operate in all provinces and service clients from anywhere in the world. There are a few key differences, which we’ve highlighted below:
Nova Scotia Incorporations
Incorporated pursuant to the Nova Scotia Business Corporations Act
Generally, less ongoing paperwork
Corporate name is only protected in Nova Scotia
$50.00 charge for filing Annual Returns
Generally recommended for businesses that are offering products or services only in Nova Scotia
Federal Incorporations
Incorporated pursuant to the Canada Business Corporations Act
Generally, more ongoing paperwork for federally incorporated companies (Federal and Provincial Annual Returns are required)
Corporate name is protected throughout Canada
$20.00 online charge for filing Annual Returns online ($40.00 if done offline), plus $50.00 charge for filing the Nova Scotia Extra-Provincial Annual Return
Generally recommended for businesses that will be offering products or services throughout Canada (for example, online based tech startups are commonly registered Federally)
It is important to note that protection of a corporate name is not the same as a trademark and you won’t have exclusive rights to your corporate name until you register a trademark.
The Incorporation Process
Request an NUANS Report
To begin, you must choose a name for your corporation. You can use a numbered corporation or select a proper name. If you choose to register under a numbered corporation, the number is assigned by the Corporate Registry. You must obtain a NUANS Report for a named company. This search will tell you whether there is an existing company with the name you wish to use or one similar to it.
The NUANS Report must be registered as part of the documents for incorporation. The NUANS Report must be filed within 90 days of the date the search was made. If you are outside the 90 days when you actually incorporate, you will have to obtain another report.
Prepare and Submit Articles of Incorporation
You must submit “Articles of Incorporation.” This document provides the details of the business you are incorporating. It outlines the corporate name, the share structure, restrictions on the transfer of shares, the number of directors, the names and addresses of the incorporators and restrictions on the corporation’s business.
Prepare and Submit Notice of Address
A “Notice of Address” must be filed showing the address of the registered office of the corporation and the records address if the records are kept in a place different from the registered office address.
Prepare and Submit Notice of Directors
The “Notice of Directors” must also be filed to show the names and addresses of the directors of the corporation and whether or not they are resident Canadians.
If all incorporation documents are in order:
NUANS Report (original report no more than 90 days old)
Articles of Incorporation
Notice of Address
Notice of Directors
and the fee is paid to the Corporate Registry; a Certificate of Incorporation is issued to confirm the existence of the corporation as a legal entity on the date of the Certificate.
The corporation should then be organized to begin the business. The Directors and the shareholders each have responsibilities for the organization of the business. For example, the Directors adopt the by-laws and the shareholders must confirm them at their next meeting. By-laws are the corporation’s internal management rules and regulations. They set out such things as voting rights, procedures for director and shareholders’ meetings and document signing authority. Also, the shares of the corporation must be issued, the officers appointed and the necessary documents approved for banking. You should consult with a lawyer when drafting the bylaws and other organizational documents. A corporate seal should also be adopted. A seal is not required for most documents signed by an officer or agent of the corporation, but your bank may insist upon one. Accountants and possibly auditors must be appointed.
Know your responsibilities to keep your company registered on the Corporate Registry’s active records. For example, you must file an Annual Return every year. The Return must have the current information about your corporation and its shareholders. If not returned on an annual basis, your corporation will be dissolved and it is expensive to revive your company again. You are also required to advise the Registry of any changes in your address, or changes in the directors.
