AVOID THIS WHEN INCORPORATING A NEW COMPANY
Business incorporation lawyer for incorporating new commercial business enterprises.
Contact Neufeld Legal PC at 403-400-4092 / 905-616-8864 or Chris@NeufeldLegal.com
I recently had to deal with this all too common situation yet again when working with a previously incorporated company and thought to share this with anyone looking to undertake the incorporation of a new company. And that is the number one thing to avoid doing when you are incorporating a company, whether it is by yourself or through an accountant, lawyer or other professional, which in my opinion is to incorporate your company with only a single class of shares.
For all too frequently, I see corporations having been incorporated with only a single class of common shares and nothing more, especially where it costs you, the incorporator, nothing more to have created additional share classes, especially preference shares (also known as preferred shares or special shares), even though none of those other shares are issued, either following incorporation or ever. Without additional share classes, when you undertake business and/or tax planning at a later date, it far too frequently cannot be done with the current form of articles of incorporation. Instead, the time and cost associated with preparing and filing articles of amendment needs to be incurred to enable the corporation’s shareholders and executives to undertake the desired business and/or tax planning.
And it is not merely the added cost associated with filing articles of amendment, but also the timing issue, which can preclude business and/or tax planning until the amendment with the new share classes is officially authorized by the government, that you should be seeking to avoid.
Instead, when incorporating a new company, it is almost always advisable to include a sufficient number of different share classes, with differing share characteristics, including both common shares and preference shares (also referred to as special shares). This in turn will make corporate planning that much more efficient, be it from a business and/or tax planning perspective, as you look to avoid the added time and cost of dealing with this at a later date by having to prepare and file articles of amendment.
When you incorporate a new corporation with our law firm, you will benefit from the professional services of an experienced corporate lawyer who understands the importance of devising the appropriate corporate structure for your business operations, planning it for future growth and success, while legally optimizing the Canadian tax system to your commercial advantage. So if you are looking to incorporate a new corporation or deal with the corporate legalities impacting your company, contact us via email at Chris@NeufeldLegal.com or by telephone at 403-400-4092 [Alberta]; 905-616-8864 [Ontario].
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