Alex Koch

I sure wish I had known Alex Koch, founder and principal at Insight Legal, when I decided to pursue my passion as a full-time profession. Don’t get me wrong: entrepreneurship has its perks. But the legalities involved are pretty prosaic, for a right-brained creative like me. In this week’s Write-or-Die Girl column, Alex breaks down business-starting steps into bite-sized, digestible morsels.

The Province of Ontario presents entrepreneurs with many opportunities to start businesses, firstly as a host to a significant portion of the Canadian population, and secondly as a province offering its residents some of the country’s highest incomes. For this reason, many entrepreneurs are seeking to commence their business ventures in Ontario; however, it is not always abundantly clear where these entrepreneurs should start and how they should proceed.

To help guide these entrepreneurs, I have compiled a list of steps involved in starting a business in Ontario.

STEP 1 – SELECT YOUR BUSINESS STRUCTURE

Prior to starting any sort of business operation, entrepreneurs must choose the appropriate business structure for their business. If entrepreneurs are seeking to start a business on their own, they will consider operating as a sole proprietorship or a corporation. Alternatively, for entrepreneurs seeking to start a business venture with one or more co-founders, they will consider operating as a partnership or corporation. You can click here for a discussion on how to choose the appropriate structure for your business. Each structure will carry with it different registration and legal compliance requirements, making it one of the most important steps in starting a business.

STEP 2 – CHOOSE YOUR BUSINESS NAME

Choosing your business name carries with it two aspects. On the one hand, businesses want to choose a name that suits their business and can attract customers. On the other hand, business names must meet the criteria of certain legal requirements.

Sole Proprietorship/General Partnership

Depending on the name chosen for a sole proprietorship or a partnership, business owners may have to register their business name with the Ministry of Government and Consumer Services. To operate a sole proprietorship or a partnership using only the name(s) of the founder(s), the business name does not need to be registered and the entrepreneurs are free to commence their business operation. For instance, if your name is John Galt, you can operate a sole proprietorship called “John Galt” without registering the business name. Likewise, if two founders are seeking to start a partnership and their names are John Galt and Bunbury Smith, they can operate a business using their names only without registration. If however, business owners are seeking to make additions to their business name, for example “John Galt & Sons,” the business name must be registered.

There are certain prohibitions relating to business name registration, for instance, the words “Limited, Incorporated, Inc., etc.” cannot be used since they imply that the business is incorporated. Likewise, neither a sole proprietorship nor a partnership name may imply an association with a government entity. If companies do not comply with these registration requirements, they may be fined.

Corporation

All corporations in Ontario must have a name. Companies are able to choose between two types of corporate names: (1) a numbered name automatically chosen during the incorporation process; and (2) a chosen name. If an entrepreneur is choosing his/her corporate name, the name must comply with certain standards. Specifically, the name must be distinctive and it must not be misleading or likely to be confused with names used by other organizations and businesses. Further, the name must end with a word indicating that the business is incorporated such as, Inc., Ltd., Incorporated, Limited, etc.

STEP 3 – CONDUCT A NAME SEARCH

Sole Proprietorship/Partnership

Registering a sole proprietorship or partnership name with the Ministry of Government and Consumer Services does not guarantee exclusivity of the name, meaning that businesses with identical names can be registered. Using a name that is the same as another business or is confusingly similar to another business name could result in a lawsuit from an existing company using that name. For this reason, it is prudent for business owners to conduct a name search prior to registration to determine whether a chosen name is already in use by another company.

Corporation

Companies that chose a corporate name (and not a numbered name), must obtain a NUANS (New Upgraded Automated Name Search) report that is not older than 90 days on the date of registration. A NUANS report lists names of companies using the same or similar name to the chosen corporate name. Unlike with sole proprietorships or partnerships, corporations are not permitted to register identical names to another business unless a company can provide satisfactory evidence that the two businesses will not be confused by consumers.

STEP 4 – REGISTER YOUR BUSINESS

Once an entrepreneur has selected the business name and conducted a name search, the business is ready for registration.

Sole Proprietorship/Partnership

To register a name with the Ministry of Government and Consumer Services, the entrepreneur must provide the Ministry with: (1) the name and address of the business; (2) a description of the business activity; and (3) the entrepreneur’s name and home address. If a partnership is being registered, the names and homes addresses of the partners must also be included. There are many options for registering a business name; the registration process can be completed online, in-person or by mail. Once a name is registered, the business will receive its Master Business License which acts as proof of business name registration and the entrepreneur may commence its business operations.

Corporation

To register a corporation, entrepreneurs can submit their application for incorporation to the Ministry of Government and Consumer Services. The application must include: (1) the company’s Articles of Incorporation which outline the name and nature of the business, the directors of the corporation, the share structure, etc.; (2) a covering letter that outlines the name and contact information for the corporation; and (3) the NUANS report pertaining to the corporate name. Companies that submitted their application for incorporation in Ontario are only provided with name exclusivity in the province meaning that businesses with identical names can incorporate in other provinces. If this poses an issue, the entrepreneur should consider a federal incorporation.

It is possible for corporations to incorporate with one name and to operate their business under another name. If that is the case, the corporation must register its name with the Ministry of Government and Consumer Services in the same manner as a sole proprietorship or a partnership registers its name.

STEP 5 – APPLY FOR LICENCES AND CERTIFICATIONS

Once a business is registered, the business must now register for whatever other licences, registrations, or certifications required to legally operate a business in a particular industry. Depending on the nature of its business, a company may need a business licence to operate. Likewise, a company may need Workers’ Compensation Insurance or to collect HST. In general, if a company provides taxable goods or services and earns over $30,000 per year, the company must register for an HST number with the Canada Revenue Agency and remit the HST it collects to the government.

STEP 6 – RENEW YOUR BUSINESS REGISTRATION

Once a business is operational, there are various ongoing requirements with respect to registration. For instance, sole proprietorships and partnerships must renew their business name every five years. On the other hand, corporations must make annual filings with the Ministry of Government and Consumer Services.

If you have a business idea but are unsure about how to turn your idea into reality, contact Alex Koch at Insight Legal.