When starting a new business in British Columbia, there are several steps you will have to take to turn your business idea into a reality.
There are various business structures, with different legal and financial implications. Some of the most common include:
A sole proprietorship generally involves a sole owner managing the business. It is a simple form of business organization that is inexpensive to set up. The owner can deduct business losses against personal income and realize any profits or growth. However, the owner’s personal liability is not limited.
In the context of a new venture, the most common kinds of partnerships are general partnerships and limited partnerships (with the latter being more prominent). They involve two or more people going into business together.
In a general partnership, two or more individuals manage the business together. It is generally simpler and less expensive to set up a general partnership than incorporating a company or forming a limited partnership. All partners can deduct business losses against their personal income. However, each partner is liable for all of the debts and obligation of the business and could be liable for wrongful acts of another partner.
A limited partnership involves a “general” partner and “limited” partners. The general partner, often a corporation, manages the business, can deduct business losses against personal income, and is liable for the debts and obligations of the business. Limited partners are more like investors—they contribute to the business, but do not participate in management. Their liability is limited to the amount of capital they have contributed. Limited partners can still deduct any losses against personal income. The partners will generally enter into a limited partnership agreement detailing any respective rights and obligations.
A corporation is a distinct legal entity that can sue or be sued, enter contracts, and hold property. Corporations can be incorporated under provincial or federal law. They can be public, where the corporation’s shares are traded on a stock exchange (typically once the business has matured and developed to an appropriate stage), or private, where the company has a small number of shareholders and the shares traded privately. Shareholders’ liability is limited to the amount they have paid for their shares. They may enter into a shareholders' agreement governing rights and obligations of the shareholders. Shareholders can exercise control over the management of the corporation by electing directors to govern the business.
If you want to incorporate or register your business with a name (rather than a number), the Company Registrar must approve that name. When creating a name, you should use a distinctive element that can differentiate your name from other businesses, a descriptive element, which describes the nature of the business, and a corporate designation that shows the business is a corporation (for example, ABC Mall Ltd.). If the name is too similar to another corporation in British Columbia, it will be rejected by the Company Registrar. In British Columbia, there are certain restrictions on what can be included in the name. For example, you cannot use a word to imply your business is associated with the government or royal family, and the name cannot be objectionable on public grounds. Names can be requested and reserved through the B.C. Registry’s Name Request System.
Whether you register or incorporate your business will depend on what type of business you have. In British Columbia, sole proprietorships and partnerships can be registered, while corporations are incorporated.
Sole proprietorships and general partnerships can be registered online using the B.C. Business Registry, or in person at a Service B.C. location.
It is not mandatory for general partnerships to be registered in British Columbia, however if it is formed for the purpose of trading, manufacturing, or mining, it must file a description of the partnership with the Registrar.
To register a limited partnership in British Columbia, a Declaration for B.C. Limited Partnership must be filed with the Registrar. To register a limited liability partnership, a Registration Statement for Limited Liability Partnership must be filed with the Registrar.
If you want to incorporate your business and plan to carry on business only in British Columbia, a good option is to incorporate under B.C.’s Business Corporations Act. In order to do this, you will need to:
Articles are rules for a company and its shareholders, directors, and officers. The BC Government provides sample articles.
The incorporation agreement is an agreement among the persons forming the company. The B.C. Government provides a sample incorporation agreement.
Most companies can apply to incorporate in British Columbia using the Corporate Online system. If you want your B.C. corporation to do business in other provinces, you will need to complete an extra-provincial business registration as well.
Some businesses will require a permit or licence to operate. Registering or incorporating a business is different than obtaining a business licence. You should check with your municipal government to see if you require a business licence.
The B.C. Government has a free online tool called BizPal to search for any permits and licences you may need from all levels of government.
Bennett Jones can assist new businesses in the formation, early development, start-up stage and beyond. Should you have any further questions or need further information with respect to starting a business, please do not hesitate to reach out to one of the authors of this blog or a member of our Emerging Enterprises team.