So, you want to incorporate your business. Incorporating can be a game-changer – like moving from amateur league to the big leagues—exciting, but with a new set of rules. This guide will walk you through the step-by-step process, ensuring you’re equipped with everything you need to make informed decisions. But before we dive into how to incorporate a business, let’s answer some common questions:

board of directors discussing how to incorporate a business in alberta with accountants

Why Incorporate Your Business?

Before diving into the “how,” let’s briefly touch on the “why.” Incorporating offers several advantages in comparison to other business structures (such as sole proprietorship – for a complete breakdown of incorporation vs sole proprietorship, click here). These advantages include:

Limited Liability: Personal protection is a huge reason many people incorporate. It is the main reason most entrepreneurs do, since it separates personal and business liabilities. In a corporation, the business is treated as a separate legal entity. This means that, generally, the personal assets of shareholders (such as homes, cars, and personal savings) are protected from the business’s debts and liabilities.

Tax Benefits: Incorporating in Alberta provides several tax benefits that can lead to considerable savings. Corporations benefit from lower tax rates compared to personal income tax rates, especially for income earned under the Small Business Deduction (SBD) threshold:

Small Business Deduction: In Alberta, the combined federal and provincial tax rate for small businesses earning up to $500,000 in net income is only 11%. This is significantly lower than the top personal tax rates, which sit around 48%. For corporations with net income in excess of $500,000, however, the SBD no longer applies, and the tax rate climbs to about 23% (over double, but still highly preferable to the personal tax rate).

Income Splitting: Corporations can pay dividends to shareholders, including family members, which can be a tax-efficient way to distribute income within the family (subject to the Tax on Split Income (TOSI) rules).

Tax Deferral: Corporations allow owners to defer taxes by retaining profits within the company rather than distributing them immediately as income. This deferred income can then be reinvested into the business, aiding growth and expansion. Read more about tax deferral here.

Access to Capital & Financing: Incorporated businesses have an easier time accessing capital and financing. Corporations can raise funds through the sale of shares, attracting investors who are often more willing to invest in a structured, incorporated entity. Additionally, banks and other financial institutions may be more likely to extend loans and lines of credit to corporations due to their established structure and perceived stability.

Flexible Income Management: Incorporated business owners have more flexibility in managing their income. They can choose to pay themselves a salary, dividends, or a combination of both, allowing for strategic tax planning. Salaries are deductible expenses for the corporation and reduce taxable income, while dividends can be more tax-efficient depending on the owner’s personal tax situation. Click here for how to pay yourself from a corporation and a full breakdown of salary vs dividends.

Perpetual Existence: Unlike sole proprietorships, which are directly tied to the owner, corporations have a perpetual existence. This means the corporation continues to exist even if there are changes in ownership (or when the original owners retire, become incapacitated, or pass away). This continuity can be crucial for long-term business planning and succession.

Now that you know why incorporating might be the right move, let’s look at the associated costs.

How Much Does It Cost to Incorporate?

Incorporating a business involves several costs that vary depending on the type of corporation, the complexity of your business structure, and whether you choose to do it yourself or hire professionals. Understanding these costs upfront will help you budget effectively and avoid unexpected financial surprises.

Hiring professional help (accountants and lawyers) encompasses all of the costs listed in this article and is our suggested approach for accuracy, simplicity, and peace of mind. However, we will still break down the individual costs for those who want a deeper understanding.

So, how much does it cost to incorporate? Let’s break it down.

Filing Fees: The primary cost of incorporation is the filing fee for the Articles of Incorporation. In Alberta, the standard filing fee for incorporating a business is:

$275: This fee applies whether you incorporate as a named or numbered corporation and covers the processing of your Articles of Incorporation at an authorized Alberta registry office.

NUANS Report Fee: Before filing for incorporation, you must conduct a Newly Upgraded Automated Name Search (NUANS) report to ensure your desired business name is unique. The NUANS report typically costs:

Approximately $50-$75: This fee covers the search and reservation of your business name for 90 days. It’s a mandatory step if you are incorporating a named corporation; however, it is perfectly acceptable to operate under a numbered corporation (which is assigned to you) if you so choose. With a numbered corporation, this step is not necessary.

Incorporation Service Fees: If you choose to use an incorporation service or online platform, you’ll incur additional costs. These services can save time and reduce the risk of errors but come at a price:

Incorporation Software or Service Fees: Ranges from $100 to $500 depending on the platform and package. For example, Ownr and LawDepot offer packages that include NUANS reports, Articles of Incorporation filing, and corporate records setup.
Professional Fees: Hiring an experienced lawyer (such as Hill & Hill) or corporate accountant (NowCPA) to help you through the incorporation process can cost anywhere from $500 to $1,500 or more depending on the complexity of your incorporation and the level of service provided. This option is often recommended for businesses with complex share structures or multiple stakeholders. The investment in hiring professionals prevents costly surprises down the road (offering peace of mind) and ensures the optimal setup of your corporation.

⚠️ Important: If you opt to incorporate yourself, you generally need a lawyer to make amendments anyways; therefore it’s usually best just to have lawyers handle it to begin with. Remember: Hiring professional help encompasses all of the costs mentioned in this article and makes life much simpler.

Ongoing Costs: Beyond the initial incorporation costs, there are ongoing expenses to keep your corporation in good standing:

Annual Return Filing Fee: The fee to file your annual return with the Alberta Corporate Registry is $75-$100. This filing is mandatory and ensures your business remains active and compliant with provincial regulations. Note that if a lawyer handles this for you, this would be included in their fee.
Corporate Income Tax Filings: While not a direct incorporation cost, you’ll need to budget for tax filings. When you are just starting out, expect to pay a professional $2,000 – $3,000 to prepare your corporate tax returns. As your business grows and increases in complexity, you should anticipate that these costs will also increase.
Registered Office and Record-Keeping Costs: If you have a lawyer that maintains your corporate minute book and files your annual return with the Corporate Registry, the cost of that bundled service could be $300-$450.

Again, if you hire professional help, you really don’t need to worry about any of this (and you will probably save money in the long-run). But now that you know why incorporating might be the right move, let’s look at how to incorporate a business in Alberta.

How To Incorporate a Business in Alberta:

Step 1: Choose a Business Name

For those who do not want to operate under a numbered corporation, the first step is choosing a name. Your business name is more than just a label; it’s your brand and identity. Alberta law requires that your business name be distinctive, descriptive, and compliant with Alberta’s naming regulations. Learn more here.

Key Considerations:

Uniqueness: The name must be distinct and not confusingly similar to an existing corporation in Alberta. Conduct a NUANS report to check for similar names. This report reserves your chosen name for 90 days.
Legal Elements: Your name must include a legal element, such as “Limited,” “Incorporated,” “Corporation,” or their abbreviations (“Ltd.,” “Inc.,” “Corp.”). This distinguishes your incorporated business from other types of entities.
No Prohibited Terms: Avoid terms that are misleading, suggest government affiliation, or contain words that require special permission (e.g., “bank,” “insurance”).

Step 2: Decide on the Type of Corporation

In Alberta, recall that you can incorporate a named corporation or a numbered corporation. Named corporations use your chosen business name (from the previous step), while numbered corporations are assigned a number (e.g., “1234567 Alberta Ltd.”). Numbered corporations are quicker and cheaper if branding isn’t a primary concern.

Additionally, decide whether your corporation will be:

Provincial: Incorporated on the provincial level. This is ideal if your business operates solely within Alberta. However, a provincially incorporated business can operate in other provinces if it registers as an extra-provincial corporation in those jurisdictions. Learn more here.
Federal: Allows you to operate across Canada with a heightened name protection. However, this process is more complex and expensive.

Federal incorporation vs provincial incorporation

Federally incorporated businesses can operate anywhere within Canada, whereas extra-provincial registration may be required for provincially incorporated businesses who wish to conduct operations outside their home province. Click here to learn more about extra provincial registration.

Example: A locally-focused marketing agency might opt for a provincial incorporation, while a tech startup with national ambitions could consider federal incorporation for broader protection.

Step 3: File Articles of Incorporation

The Articles of Incorporation is a legal document that establishes your corporation and outlines its structure. When filing in Alberta, include:

Name of the Corporation: Your approved business name or assigned number.
Registered Office Address: A physical address in Alberta where legal documents can be delivered. A P.O. box won’t suffice.
Share Structure: Define the classes of shares, their voting rights, dividends, and other characteristics. While most businesses start by issuing one or two classes of common shares, you’ll want to ensure that many more classes are established in your articles so that there are options down the road for restructuring.
Board of Directors: Your corporation must have a board of directors responsible for making major business decisions and overseeing the company’s activities.
Incorporator Information: The person or people responsible for incorporating the business.

Step 4: Submit Your Application

Once your Articles of Incorporation are ready, submit them along with the NUANS report and other required documents to an authorized Alberta registry office.

Where to Submit:

Use an authorized Alberta registry agent. These agents can guide you through the process and ensure your documents meet all requirements.

Step 5: Obtain a Business Number and Register for Taxes

After incorporation, your next step is to register for a Business Number (BN) through the Canada Revenue Agency (CRA). The BN is a unique identifier for your business and is necessary for various tax accounts, such as:

GST/HST: If your business earns more than $30,000 annually, you may be required to register for a GST/HST account. However, registering for this early isn’t a bad idea either.
Payroll: If you plan to hire employees, you’ll need a payroll deductions account.
Corporate Income Tax: All corporations must file annual income tax returns.

Step 6: Create Corporate Records

It is critical that you maintain accurate and up-to-date corporate records. Not only is it a legal requirement, but it also keeps your business organized and prepared for any future audits or legal matters.

Records to Maintain:

Minute Book: Includes meeting minutes, resolutions, and share certificates.
Bylaws: Rules governing the corporation’s management and internal affairs.
Shareholder and Director Registers: Records of shares issued and lists of shareholders and directors.

Example: For a landscaping business, a minute book should record decisions like shareholder issuances, dividend declarations, and key management appointments.

Step 7: Open a Corporate Bank Account

Separate your personal and business finances by opening a corporate bank account. This helps maintain clear financial records and reinforces the legal distinction between you and your corporation. Documents required to open a corporate bank account may vary by corporation, but generally, the following is required:

Documents Needed:

Articles of incorporation/association
Certificate of Status
Certificate of Existence
Certificate of Compliance
Corporate Profile Report
Corporate Annual Government Filing
Business Number
Business License
Notice of Assessment for Income Tax
Two pieces of identification for the corporation’s signing authorities

Step 8: Comply with Ongoing Legal Obligations

Incorporation is not a “set it and forget it” scenario. Your corporation must comply with ongoing legal obligations (which we covered earlier). To refresh, these include:

Annual Returns
Tax Filings
Maintain Corporate Records

Tips for a Smooth Incorporation Process

Hire a Lawyer and Accountant: While incorporating on your own is possible, professional help ensures all legal and tax considerations are addressed. This is especially important if your business structure is complex or if you’re unsure about the incorporation process.
- Consult Before You Act: Engage an accountant early in the process to discuss the pros and cons of incorporation, ideal share structures, tax planning strategies, and more. Click here to get started.
- Revisit Your Structure Regularly: As your business grows, your initial setup might need adjustments. Regular consultations with your accountant will ensure your corporation remains optimized for your evolving needs.
Plan for Growth: Learning how to incorporate a business in Alberta means considering future expansion when drafting your share structure. Multiple share classes can accommodate potential investors or future business partners without diluting your control.

Ready to Incorporate?

Now that you know how to incorporate a business in Alberta, it’s time to take the next step. If you’re looking for help with incorporating in Alberta, NowCPA is happy to help – click here to get started. With the right preparation, incorporation can be a smooth process that jumpstarts your ultimate journey to success.

How to Incorporate a Business in Alberta: Your Essential Guide & Crash Course on Incorporation