When someone wants to go into business for themselves, one of the first questions they ask is: “Should I incorporate a corporation?” A corporation (sometimes referred to also as a “company”) is a legal entity separate and apart from an individual.  It allows you to carry on business without the risk of personal liability for most (but not all) debts and claims that you would have if you operated your business in the form known as a “personal proprietorship”.  Whether you should incorporate or not depends on many factors, including the type of business operation, whether you will be dealing with the public, if you will have employees, and the expected revenue that the business will generate.  Oftentimes it will be prudent to review your business plan with both an accountant to determine whether there will be any tax benefits or savings from incorporating, and also with a lawyer, to assess the types of risks that may result from your proposed business.

If you do decide to incorporate, there are a number of questions you need to consider.  The first is whether you should incorporate under the laws of the Province of Alberta (known as a “provincial incorporation”) or under the laws of the Government of Canada (known as a “federal incorporation”).  For most businesses, it is preferable to incorporate under Alberta law.

The next issue is whether you want what is known as a “numbered corporation” (e.g. 121212 Alberta Ltd.) or a “named corporation” (e.g. Smith Holdings Ltd.).  There is no difference in the legal status of having a number or a name.  It is a matter of personal preference and the type of business you will be incorporating for.  If you are going to incorporate with a name, the next step is to have a “name search” done to check to see if your proposed name is available.  If it has already been used by another corporation, or if your proposed name is similar to the name of an existing corporation, then you will need to come up with a different name.

The next step is to decide on the corporate structure - which means determining who will be the shareholders, directors and officers of the corporation.  The shareholders are the ones who actually own the corporation (through the shares that are issued to them), the directors are responsible for the general legal administration of the affairs of the corporation, and the officers are responsible for the day to day operations of the corporation and for signing legal and banking documents.  In a personal business corporation, the same person or persons will usually be all of those.  You will also need to decide what address to list as the “registered office” of the corporation.  The registered office is the address to which anyone is entitled to send documents to in order to get them to your corporation.  You may designate any address of your choosing as your registered office, including your own home, your place of business, or your lawyer's office for example.

Once all of these issues have been decided upon, you are then ready to proceed with the actual incorporation.  The Corporate Registry of Alberta will issue a Certificate of Incorporation, which confirms the legal status of your corporation as a valid legal entity.  Once the Certificate has been issued, the directors and shareholders are then required to document the internal corporate structure, by way of issuing the appropriate shares, approving corporate by-laws, and electing directors and officers for the next year.

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