Don’t Make These Incorporation Errors

Anyone can set up a new corporation by setting up an account with the Corporate Registry operated by Information Services Corporation. However, the Corporate Registry is just a notice-based registry that contains mandatory public information about Saskatchewan corporations, it is not where a corporation’s records are created. 

Saskatchewan corporations are legally required to create and maintain various corporate records at their registered office. Many small business owners miss out on some of the corporate compliance obligations imposed on every Saskatchewan corporation when incorporating without legal advice.

Some typical errors we see after years of helping businesses incorporate:

1. Setting Up the Wrong Share Structure

The articles of incorporation, created when a corporation is incorporated, contain a critical foundational framework for the corporation. One of the elements is a description of all of the different classes of shares that the corporation may issue to its shareholders, along with a thorough description of all of the attributes for each class of share. If these share classes are not set up properly, it can negatively impact the corporation’s capital structure in the future, leading to additional costs.

2. Not Knowing All Compliance Duties

Every corporation in Saskatchewan must follow numerous corporate compliance obligations, whether the business owner is aware of them or not. Incorporating on your own increases the risk of missing some of these obligations and failing to comply with corporate law. Using a lawyer to incorporate provides you with a trusted advisor to make sure you’re doing everything you’re supposed to when creating your corporation and to help with any questions you might have in the future.

3. Not Maintaining Proper Corporate Records

Every corporation must maintain a minute book with various corporate records, such as minutes or resolutions from the board of directors and shareholders. Corporate law requires certain decisions by the board and shareholders to be made yearly and documented in either meeting minutes or a written resolution signed by all directors or shareholders. This is just one example of many corporate record-keeping obligations.

Keeping accurate corporate records is not only a legal requirement but also essential if the corporation seeks lender financing, gets audited by the CRA, or wants to sell the business. Accurate records demonstrate that the corporation has maintained proper documentation since incorporation.

4. Not Filing Annual Returns on Time

Every corporation must file a corporate annual return each year by its due date. A corporate annual return is different from an income tax return. Failing to file the corporate annual return on time will eventually result in the corporation being struck from the corporate register. Restoring the corporation to the register involves additional steps and unnecessary costs. Using a lawyer as the corporation’s registered office ensures that the annual return filing is never missed.

By focusing on these critical areas and seeking legal advice when necessary, you can ensure that your new corporation meets all corporate compliance requirements and is well-positioned for future growth and success.

Disclaimer: This Blog is intended to provide readers with general information. Each client’s circumstances and legal solutions might vary. For further details, please reach out to us to learn more.