What is a Corporation?

Corporation

For those not familiar with the concept, to put it simply, a corporation is a formal legal structure that is used to operate a business, or to hold property or assets.

A corporation exists as its own separate legal entity and is legally distinct and separate from its founders / shareholders. In other words, a corporation is, in the eyes of the law, a legal person (like an artificial person). This means that, much like a real person, a corporation can own its own assets, and incur its own liabilities and debts which are all separate from the people who ‘own’ the shares of the corporation, the shareholders.

A corporation is made up of shares; the shares are owned by the shareholders; and because a corporation is like a person, and needs to make decisions, it has directors (who are elected by the shareholders). Directors are the ones tasked with the operational decisions of the corporation. They are also referred to as the ‘directing minds’ of the corporation. The Shareholders and directors can be, and often are, the same person or people in small or start-up businesses.

This unique setup offers a protective shield for its owners’ personal assets which is referred to as limited liability and creates a fertile ground for business growth and expansion.

By adopting a corporate structure, businesses can tap into various advantages, from potential tax benefits to attracting investors, and offering flexible way to pay the people involved, all while ensuring that the company’s vision thrives in a stable and secure environment.

Common Types of Corporations

Numbered Company – this is where the name of the corporation is simply a series of numbers (its registry number) and a legal ending; such as 123456 Canada Inc., or 123456 Nova Scotia Limited. You don’t get to choose, the number is automatically assigned.
Named Corporation – the is where you choose your corporate name and legal ending. Such as ‘ACME Inc.’; or; ‘ACME Ltd.’ *Tip – the legal endings are required, such as Inc., Ltd., Incorporated, Limited, and they all have the same meaning, so you can choose which you prefer.
Federal or Provincial – in most cases a provincially incorporated company will be what
you need, and also in most cases it a bit easier to maintain. When you incorporate provincially, you are
also registered to operate in the province of incorporation. If you want to
operate in other provinces, you can register in the other provinces. When you
incorporate federally, you have to take a 2^nd step and register to operate
in a province. This means, provincial corporations have one annual renewal, and
federal have two.
What the difference between a Company, Corporation, LLC, Limited Liability Company, etc? They all refer to a corporation, or a body corporate, and can be used interchangeably as lay or everyday terms. The legal and technically correct description actually depends on the laws of the province or jurisdiction you incorporate in. For example, in Nova Scotia, corporations are formed under the law called the Nova Scotia Companies Act, so we refer to them as Companies, or a Company. In New Brunswick the law is the Business Corporations Act, and we would typically refer to it as a ‘corporation’.

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