Incorporating online vs with a lawyer in BC: what the DIY route leaves out

You can incorporate a BC company online in an afternoon. The Province publishes the steps, and several commercial services will fill in the forms for you. Many founders reasonably ask why they would involve a lawyer at all.

The answer is less about the filing and more about what comes with it. A company is a set of rules, shares and records, and the Business Corporations Act expects all of them to exist from day one. This article sets out what the law requires, what a DIY filing tends to cover, and what it often leaves for later.

What the law requires to form a BC company

Under section 10 of the Business Corporations Act, one or more people form a company by signing an incorporation agreement, filing an incorporation application with the registrar and complying with Part 2 of the Act. The incorporation agreement records each incorporator's agreement to take shares, with the number and class of shares each one is taking. The application includes a notice of articles, which sets out the company's name, directors, office addresses and authorized share structure.

Section 12 also requires every company to have articles: the internal rules for how the company is run. The incorporators sign the first set of articles. If no incorporator signed a set of articles, section 16 says the company takes Table 1, the standard set in the Act, as its articles.

The person who files the application, called the completing party, must check that the articles and incorporation agreement are signed and then deliver the originals to the company's records office (section 15). The government fees are modest: the Province lists $30 for a name request (or none if you use a numbered name such as 1234567 B.C. Ltd.) and $350 to incorporate most companies.

What an online filing usually covers

A DIY or online filing generally gets the incorporation application filed, the name approved or the number assigned, and a standard form of articles in place. For a single owner running a simple business, that may be enough to start. The certificate of incorporation arrives, a business number follows, and the company can open a bank account.

The gaps tend to show up later, when an accountant, a bank, an investor or a buyer asks to see the company's records.

What the DIY route often leaves out

• Articles that fit the owners. Template articles are written for no one in particular. If you have more than one class of shares, section 12 requires the special rights or restrictions for each class to be set out in the articles, and the notice of articles must describe the authorized share structure (section 53). Changing them later takes resolutions and filings.
• A share structure planned with your accountant. Voting and non-voting classes, or separate classes for family members, are common planning tools. Whether they suit you is a tax question as much as a legal one, and it is easier to build in at the start than to retrofit.
• Organizing resolutions. After incorporation, the directors normally pass resolutions to issue shares, appoint officers and deal with banking and the fiscal year. A first director who did not sign the articles as an incorporator must consent to act (section 121). Without these, it can be unclear who owns what.
• The records office. Section 42 lists the records a company must keep, including its articles, the signed incorporation agreement, a central securities register (section 111), a register of directors, director consents and the minutes and resolutions of directors and shareholders.
• The transparency register. Private companies must take reasonable steps to keep a register of significant individuals, the people who ultimately own or control the company (section 119.2).
• A shareholders' agreement. If there is more than one owner, the articles alone rarely answer what happens on a disagreement, a departure or a death. A shareholders' agreement covers those questions.

The obligations that start after incorporation

Incorporation is the beginning of a set of recurring duties. The company must file an annual report within two months after each anniversary of its incorporation (section 51). It must hold an annual general meeting or have its shareholders pass a unanimous resolution in its place (section 182), and file a notice of change of directors within 15 days of any change (section 127). Our BC company annual compliance checklist walks through the full year.

These duties are the same whether you incorporate online or with a lawyer. The difference is whether the records needed to meet them were set up properly in the first place.

Cleaning up a company that was set up on its own

Many companies incorporated online run for years before anyone looks closely at the minute book. When someone finally does, often during a bank loan, a sale or a dispute between owners, common findings include shares that were never formally issued, missing director consents, no securities register and no transparency register.

Most of these gaps can be addressed by preparing the missing resolutions and registers and confirming the history with the people involved. Some, such as conflicting records of who owns which shares, take more work. Fixing them before a transaction is usually simpler than fixing them under a deadline.

How to decide which route suits you

Doing it yourself can be reasonable when there is one owner, one class of shares and a commitment to keeping the records current. Legal help is worth considering when there will be more than one shareholder, family members or a holding company will own shares, investors are involved, or you are moving an existing business into the new company. If you are still weighing whether to incorporate at all, start with whether incorporating makes sense for your business.

Incorporating, or tidying up a company you set up yourself?

Our business lawyers can prepare articles and a share structure that fit your plans, set up the organizing resolutions and records office, and review and complete the records of a company that was incorporated online.

Call 604-259-2844 or send us a message to arrange a consultation at our Vancouver office.