For those of you that are wondering where I’ve disappeared to these past few months (aside from writing a novel), here is the answer. ;] I’ve founded my own corporation of which I am the President (of awesome). (There. The cat is now out of the bag. Meow!) Now in forming my own corporation, there were a few roadblocks that I ran into. You see, there are a lot of web sites out there that detail just what a corporation is and why in some circumstances you should create one.
However many of these guides leave out one thing: how? (Or in my case, after many unsuccessful attempts at finding information: “How the hell do I create my own corporation?“*) Generally because the incorporation process differs all over the place. (I hope there isn’t some sort of secret business brotherhood or assassin accountants and that’s why I haven’t found much information) I’ve even had a few places tell me that “starting a corporation is easy!” Well, okay, sure. I would possibly agree with you if the last business course I took hadn’t of been in grade nine and over ten years ago. In short, yes, creating a corporation is easy if you know the business terminology involved. Taxes? Payroll? CPP? EI? Remittances? I’m still learning as I go along, and because of that, I thought that I ought to document the process in case anyone else has similar questions.
So here it is: How to Create a Corporation in Calgary, Alberta, Canada.
Creating Your Corporation
At first I wasn’t quite sure who to go to. Then I learned that many registration companies have this thing called a “Corporation Kit,” or “Corporation Starter Kit.” Sort of like Pokemon, but more likely to make you dazed and confused than your opponent (Jodie hurt herself in her confusion!). I bet no other corporation guide makes a reference to Pokemon. Anyway, a Corporation Kit contains documents that cover the following topics (and then some):
- Business Name *
- Type of business / description of the major business activity
- Name and address of your businesses Owners, Partners, Directors, etc.
- Share information
- Address where the business is physically located
Just fill these out. They really are not that hard and for the most part just require you to sign your name, print your address, and the date a dozen times. It gets a little bit trickier if you’re creating a business with multiple people or co-owners, but the paperwork is still rather straightforward.
* Business Name
The first thing that I would like to stress is that you do not have to create a business name in order to create a corporation. In fact, if you do not supply one, you will just be given a Numbered Business Name. Now, this is not nearly as fancy as say having Cool Stuff Inc., but it gets the job done. Remember that you can always register for a business name at a later date if you so desire. In my case I just went with a Numbered Business Name because I wasn’t quite sure what to call this… monster that I was creating.
Not only that, but if you choose to register a Business Name, the registration process takes longer and it costs a lot more. You have to pay for a name search (to make sure there are no companies that are named like yours), as well as other things. It felt like a hassle to me at the time.
So I filled out the corporation kit and took it into the registration office in the morning. I had to show them identification (driver’s license in my case) and pay the corporation registration fees (~$250.00 CDN).
The next morning I came back and picked up my Certificate of Incorporation. Fast. I know.
The next few steps regarding hiring employees and the like you so do as close together as possible. Why? Well if you register for a Payroll account number and haven’t paid your employees due to not having any employees yet, well the Canadian Revenue Agency (CRA) will send you letters and call you up asking why. I like to believe it’s because they care about Canadian employees since it’s to them that you will be sending your remittances (CPP & EI – I’ll get to that in a moment). I actually had to tell the CRA why I hadn’t been sending them money (no employees hired yet!), and give them an expected date of when I’d have income to pay my employees.
Obtaining a Business Bank Account
You are going to need a new bank account for your Corporation because it is to this entity that cheques and the like are going to be made out to. This one was pretty simple. With my Certificate of Incorporation (to prove that I have a registered business), I went to the bank (TD Canada Trust), and spoke to a small business adviser. They set me up with a small business account, linked it to my online banking account, and gave me a shiny new ATM card and some blank cheques. You can also get other things from them, like a business credit card, line of credit, etc., but I’ve been trying to keep these simple. So there are generally other bells and whistles if you so desire.
Business Number, GST & Payroll Registration
Business Number: This number is sort of an identification number that the federal government uses in order to streamline and simplify its processes when dealing with your corporation. Your GST and Payroll numbers are all tied to this thing.
GST Number: Your GST number is also used for identification. You collect GST for the government (and hold it in trust), until it is time for you to give it to them. It is your GST number that generally tells people that yes, you do have the authority to collect GST. This number is often printed on invoices where GST has been added.
Payroll Number: Yet another number! This number is also used to identify you. When you pay your employees both they and you pay a part of their CPP and EI. This “remittance” then gets sent to the Canadian Revenue Agency and you’ll need this number to do that.
So back to GST and Payroll number registration. Want to know something cool? You can do this online!
Want to know how? I’ll tell you because I found the CRA web site to be a navigational nightmare. Talk about user unfriendly. They really ought to hire someone to fix that because I’m not sure how many hours I wasted looking around at documents that were completely irrelevant.
Fun tip: instead of wasting your time trying to navigate the CRA site, use Google! Look at this magic: site:cra-arc.gc.ca gst register From there I was able to find the “Registering (opening) your GST/HST account” where I was able to find the “How to register” (you can do this online, by phone, or mail/fax) which then took me to their Business Registration Online page. Pretty convoluted, I know. You could also use CRA’s search, but I found it more annoying than anything… although I think I was annoyed with the site in general.
All you need to do is go through the required forms and enter in the information as needed. Like most forms they ask for the normal things like address, name, and such.
I went through and registered for a Business Number, GST Number (since I will be collecting GST), as well as a Payroll Number so that I would be able to hire and pay employees. Because they need to verify your business and such, there is a little bit of a wait time here. Once everything has been processed you’ll receive a paper with your new Business Number and all of that other fun stuff on it.
Hiring Employees
This is an easy one. Of course, it scales depending on the amount of people that you’re hiring. In my case I was only hiring myself because at the time of writing, I am the only employee of my corporation. :)
That being said, I’m sure that you are familiar with this process if you have had any sort of job in the past. Your employer will generally sit you down and get you to fill out a TD1 (Personal Tax Credits Return) Form. Your employer then keeps this. Why? Because they need it in order to calculate your Payroll deductions correctly.
So to hire a new employee you need to:
- Get their Social Insurance Number (SIN)… which the TD1 form has a handy spot for.
- Have them fill out a TD1 (Personal Tax Credits Return) Form.
Where do we find the forms? Let’s use Google again. site:cra-arc.gc.ca td1 form There are different forms for each Canadian province/territory, so be sure to pick yours.
Have your new employee fill this form out and keep it in a safe place for your records.
Payroll & Remittances
Payroll Deductions Online Calculator
The pain. This one hurt. Out of all the steps so far, I think that this has been the most complicated due to the math involved… but that also might be because of my unique circumstances.
The CRA also has a handy online tool for this as well. It’s called the Payroll Deductions Online Calculator (PDOC). This is where you must take into consideration your new employee’s TD1 form that they filled out. Take the info from the TD1, take your employees gross income, their previous CPP/EI contributions (if any yet), punch them all in, and it tells you how much you’ll be paying them once taxes are all said and done.
It will also tell you how much that you need to remit. You see, when you make a contribution to your Canadian Pension Plan (CPP) and Employment Insurance (EI), so does your employer. All of these things and then some are then added together and this is the amount that you send to the Canadian Revenue Agency by the 15th of every month.
Remittances
You will need to do this for each employee that you have… which is why many people end up getting software and/or hiring someone else to do it I imagine. I bet it can get really taxing… haha.
Depending on your financial institution, you may also have the option of submitting your remittances to the CRA directly. Schwing! I like it when they make things easy on me.
Issuing T4s
This is another process that scales depending on the amount of employees that you hire. For each employee that you have, you must create and submit a T4 form. T4s tell the government how much your employee has earned and contributed and is required for them to complete their personal taxes. With that said, you must submit all of your T4s to the government by the last day of February. (If the last day is a Saturday or a Sunday, then the due date moves to March 1st.)
You must also give a copy of the T4 to the employee!
Now luckily, this is also a step that you can complete online. If you have a lot of employees, you can download software to manage all of this information. Worst comes to worst, there are plenty of paid services you can obtain to help you out.
This is the employee information that you need for a basic T4 slip. I say basic because it will differ sometimes between employees, and will vary a lot of you have a pension plan and RSP options.
EMPLOYEE
- [12] Your employee’s social insurance number.
- [14] Your employee’s Gross Income. (What they made before all deductions were taken off.)
- [22] Your employee’s total income tax deducted.
- [16] Your employee’s total CPP contributions for the year.
- [18] Your employee’s total EI contributions for the year.
EMPLOYER
- [27] The total amount of CPP that your company has contributed for the employee (will most likely be the exact same as the employee’s CPP contributions).
- [19] The total amount of EI that your company has contributed for the employee. This is the employee’s EI [16] contributions times 1.4.
Submitting a GST Return
As a company you collect taxes on behalf of the government. They trust you with this money until it’s time for you to fork it over to them. So the dollar amount that’s in your business bank account is always misleading. At least once a year you are required to submit a GST Tax return (GST34 form) before April 30th. Much like my CRA payroll remittance payments, I was able to add GST34 as a registered payment/account option via my bank, so I can easily submit my GST return directly through them. Simply add up the GST that you’ve collected for your company’s fiscal year, and submit!
Year-End Taxes
I haven’t gotten here yet, but I’ll let you know how that goes. =D Protip: It would be wise to hire a specialist to do this part for you… because I’m not really going to be able to go into much depth about company taxes due to their individual nature.
* I really hope people find me via Google with that phrase.
