Shelf Companies have been incorporated at an earlier point in time. For certain business case uses this may be beneficial. You should speak with your corporate accountant to confirm if a Shelf Company is appropriate for your business.
What are the ongoing responsibilities of maintaining a company?Darrell Keys2021-03-09T23:27:40+00:00
All companies purchased through BCShelfCo have had their annual reports filed and have had all required shareholder and director resolutions maintained, and the Transparency Register has been created and updated as needed.
What is a director and do I need one for my Company?Darrell Keys2021-02-20T00:56:04+00:00
A director is responsible for the management and stewardship of the Company and is responsible to its shareholders. All companies in British Columbia must have at least one director. British Columbia companies have an advantage over incorporations at the federal level or in other provincial jurisdictions of Canada in that there are no residency requirements for directors. This means that a director may live in Timbuktu and not be offside of the requirements of the Business Corporations Act of BC.
The responsibilities of directors is a complex topic. For an in-depth overview of the responsibilities and obligations of directors, you can read this.
Shareholders are the owners of a company. The ownership of a company through shares is one of the principal benefits of incorporation – it permits an almost endlessly customizable ownership structure. Shares can have many different types of attributes – such as voting, dividend entitlement, participation upon company sale / windup etc. which are beyond the scope of this FAQ.
The share structure of a company and the distribution of shares can change an unlimited number of times over the lifespan of the company, however it’s best to consult your accounting and legal advisors prior to making any adjustments and to ensure that the appropriate documentation is in place. Many entrepreneur duos “handshake” to split shares 50/50 and then never actually distribute the shares … no big deal until there’s a disagreement or the company starts to succeed.
How many directors do I need?Darrell Keys2021-02-20T00:56:38+00:00
At least one. In general it’s helpful to have an odd number of directors to simplify decision making however many companies have 2 or 4 directors, and mechanisms can be put in place to resolve deadlocks through shareholders’ and other private agreements.
Are there residency requirements for directors or shareholders of BC companies?Darrell Keys2021-03-09T23:28:44+00:00
No, BC directors are not subject to residency requirements.
However, if more than 50% of the shareholders or directors of a company are not tax-resident Canadians, then the company may lose its status as a Canadian-Controlled Private Corporation (CCPC). This area of law is complicated and so if you are contemplating having non-residents as shareholders and directors of your company you should speak with your lawyer or accountant.
What are the tax benefits of corporations?Darrell Keys2021-02-20T01:03:10+00:00
This is a complex subject and should be discussed in detail with your corporate accountant.
However the primary tax related benefits of incorporation are the following:
Lower income tax rate.
As of February 2021, the corporate tax rate for BC companies is 27%. However, most new companies will qualify for the Small Business Deduction provided they remain CCPCs (see ‘residency’(link) FAQ above), which entitles them to a tax rate of 11%. Compare this with the marginal personal tax rates and it is easy to see why it would be preferential to have business income taxed on a corporate basis. Bear in mind, however, that once income is drawn from the corporation to the personal side, it will be subject to some additional tax, and so the income tax benefit is largely a tax deferral mechanism – unless you have a holding company or other corporate vehicle in place that can hold and invest corporately held dollars for long periods of time.
Access to the lifetime capital gains exemption (LTCGE) on the sale of your business.
If your business grows and eventually becomes worth $1m and you elect to sell the shares in your company for that amount, most of the proceeds of that sale are exempt from tax by virtue of the LTCGE. If you were to sell the same business for the same amount except that it was structured as a sole proprietorship rather than a corporation, you would be taxed on the entirety of that capital gain.
If your business is growing and accruing value, it should probably be incorporated. If you plan to one day sell your business, incorporation is essential.
In addition to incorporation, there are various qualifications that must be satisfied in order for the shares of your company to qualify for LTCGE treatment. You should discuss this with your accountant and lawyer to ensure you are on side.
How will I receive the shares following purchase of the Shelf Company?Darrell Keys2021-03-24T02:54:43+00:00
All Shelf Companies purchased through bcshelfco.com come with a custom set of lawyer-drafted Articles of Incorporation with a share structure that is of particular benefit to most Shelf Company purchasers.
Many owners of a new Shelf Company will require a rollover under Section 85 of the Income Tax Act. In order to perform this rollover, specific classes of preferred shares must exist within your share structure, and we have provided these “Section 85” share classes within your share structure to assist you and your legal and accounting advisors to smoothly transition your business into an incorporated entity.
What is a rollover, and why would this be beneficial to me?Darrell Keys2021-02-20T01:04:34+00:00
This is a complex topic and may or may not be relevant to you. You should speak with your accountant first to determine if this is important for you. However, the essence of a rollover is that it permits the transfer of property from one party to another without attracting the usual tax on dispositions of property. It is a complex area and must be handled by expert legal and accounting advisors.
Has a bank account ever been opened for a Shelf Company purchased through bcshelfco.com?Darrell Keys2021-03-24T02:54:35+00:00