THE THREE COMMANDMENTS OF ANY NEW INCORPORATION

Opening a new incorporation (the famous INC) is an important decision in the life of any entrepreneur. It is a strategic decision to announce that the entrepreneur is ready to move on to another level of management.

Why on another level? Because managing a sole proprietorship or a SENC (general partnership) is not the same as managing an INC. Managing the latter requires much more effort and administrative support.

For example, the fact that the INC has a different legal personality from that of its founders/shareholders means that a tax declaration for it must be made separately from that of its shareholders (owners). We can even choose a different fiscal year end date than December 31 depending on the fiscal needs of the company and/or its shareholders.

Precisely, yes an INC requires more administrative support than a sole proprietorship, on the other hand, it offers many more advantages, especially at the tax level and at the level of the responsibility of the shareholders. Thus, a shareholder is in no way responsible for the debts of the company, except
if, for example, he signs a personal guarantee. On the other hand, as an administrator he will be personally liable for serious/gross misconduct in the management, in particular fraud, non-
payment of GST/QST, non-payment of employee salaries up to six months' salary and others.

That being said, when setting up an INC, any new owner must follow the following three commandments:

1- Within three months of the end of the fiscal year of each year, the board of directors, whether composed of one or more directors, has the obligation to convene the shareholder(s) (especially voting) even if the directors and shareholders are the same people, for an annual general meeting of shareholders (AGM) in order to among others; approve the company's financial statements (if available), appoint or remove directors, appoint an auditor or take any other decision that requires shareholder approval. Exceptionally, the Board of Directors may, at the end of the first fiscal year, fulfill this obligation within six months following the end of this year. On the other hand, we recommend respecting the period of three months from the
first year to get used to it.

2- For any decision at the level of the board of directors, it must be written in the form
by a resolution of the board of directors. This is not a legal obligation, but in order
to ensure good governance it is always better to do it this way.

3- When opening a bank account following incorporation, especially if it is a federally chartered company, it is absolutely necessary to put the subscription price of the shares in the account. For example, if you have subscribed to 100 A shares at $1/share, you must put $100 in the account.
Finally, a practical advice for those who register for GST/QST with an annual reporting frequency, so as not to end up at the end of the year with an amount to pay to the government that we do not have, open a saving account for the company and deposit the taxes charged
clients in this account periodically (every week, monthly, every three months, etc.), so that you arrive at the end of the year ready to transfer these sums to the tax authorities without any worries or surprises.

For any other questions, do not hesitate to contact us at Legal Law, our corporate law team will always be there to help you.

Mr William Korbatly,
Lawyer, mediator and accredited arbitrator in civil and commercial matters.