A British Columbia corporation is a statutory creature, created and regulated by provincial law (British Columbia Business Corporation Act). In short, if you want the “privilege”—that’s what the courts call it—of turning your business enterprise into a corporation, you must follow the requirements of the British Columbia Business Corporation Act. What sets the corporation apart, in a theoretical sense, from all other types of businesses is that it is a legal and tax entity separate from any of the people who own, control, manage, or operate it.
The provincial and federal corporations laws and federal and provincial tax laws view the corporation as a legal “person.” This means the corporation is capable of entering into contracts, incurring debts, and paying taxes separately from its owners.
Advantages of Incorporating in British Columbia
Let’s start by looking at the advantages that flow from this separate entity treatment of the corporation. The first and foremost is built-in legal limited liability protection.
1. Limited Personal Liability
The owners (shareholders) of A British Columbia corporation are not personally liable for business debts, claims, or other liabilities. Put another way, this means that people who invest in a corporation—shareholders—normally stand to lose only the amount of money or the value of the property that they have paid for its stock. As a result, if the corporation does not succeed and cannot pay its debts or other financial obligations, creditors cannot seize or sell the corporate investor’s home, car, or other personal assets.
2. Advantages of Corporate Tax Treatment
Unlike other business forms, A British Columbia corporation is a separate tax entity, distinct from its owners. This means that the company itself is taxed on all profits that it cannot deduct as business expenses. This separate-entity tax treatment brings certain benefits to a corporation—for example, it permits income splitting between the corporation and its owners, and also allows the owners to be classified as “employees” of their own business.
3. Income splitting.
Because a corporation is a separate taxpayer, it has its own income tax rates and files its own tax returns, separate from the tax rates and tax returns of its owners. This double layer of taxation allows corporate profits to be kept in the business and taxed at corporate tax rates, which can be lower than those of the corporation’s owners.
4. Built-In Organizational Structure
A unique benefit of forming a corporation in British Columbia is the ability to separate management, executive decision making, and ownership into distinct areas of corporate activity. This separation is achieved automatically because of the unique legal roles that reside in the corporate form: the roles of directors (managers), officers (executives), and shareholders (owners).
5. Raising Money—Corporate Access to Private, Venture, and Public Capital
British Columbia Corporations offer a terrific structure for raising money from friends, family, and business associates. There is something special about stock ownership, even in a small business, that attracts others. The corporate structure is designed to accommodate various capital interests.
For example, you can:
• issue common, voting shares to the initial owner-employees
• set up a special nonvoting class of shares to distribute to key employees as an incentive to remain loyal to the business, and
• issue a “preferred” class of stock to venture capitalists willing to help fund future expansion of your corporation. (Preferred stock puts investors at the front of the line when dividends are declared or when the corporation is sold.) Corporate capital incentives also attract creditors who are more willing to help finance a promising corporate enterprise in return for an option to buy shares.
6. Perpetual Existence
A British Columbia corporation is, in some senses, immortal. Unlike a sole proprietorship, partnership, or LLP, which may terminate on the death or withdrawal of an owner, A British Columbia corporation has an independent legal existence that continues despite changeovers in management or ownership. Of course, like any business, a corporation can be terminated by the mutual consent of the owners for personal or economic reasons.
In some cases, it is terminated involuntarily, as in corporate bankruptcy proceedings. Nevertheless, a corporation does not depend for its legal existence on the life or continual ownership interest of a particular individual. This encourages creditors, employees, and others to participate in the operations of the business, particularly as the business grows.
How to Register a Corporation in British Columbia
To incorporate a new company in British Columbia., one or more persons(called “the incorporators”) may form a company by filing articles of incorporation, notice of address and notice of directors with the British Columbia Corporate Registry Office.
To register as a corporation in British Columbia, you will need to:
- Incorporate your business (obtain your articles of incorporation) through federal incorporation or provincial/territorial incorporation
- Get a federal business number and Corporation income tax account from the Canada Revenue Agency
- Register as an extra-provincial or extra-territorial corporation in all other Canadian jurisdictions where you plan to do business
- Apply for any permits and licenses your business may need.
British Columbia Incorporation Service
We offer fast & easy British Columbia incorporation and business registration services. At Ecompanies Canada we help you step-by-step and take care of the entire business registration process from start to finish. Incorporating a new business in British Columbia with us is fast, easy and takes just minutes. Incorporate Now for Only $99 plus government fees.
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