5 myths about stock corporations

Here are 5 widely-held but inaccurate myths about companies.

Myth #1: A provincial company can't do business outside the province

This is not true. Federal incorporation is not essential for doing business outside the province of incorporation. Once incorporated, a provincial company has "legal personality" and is free to do business anywhere, subject to the local laws where it wishes to operate. Thus, a Quebec company wishing to open an establishment in Ontario will be able to do so, provided it registers the company with the Ontario Enterprise Registrar. Even a federal corporation will have to register in the provinces where it wishes to do business, so the difference between the federal and provincial regimes is largely conceptual and theoretical in this respect.

Myth #2: Federal incorporation gives better protection for the company name

This is incorrect. It's true that the analysis of name availability for a federal corporation is done on a Canada-wide basis (thus leading more easily to name refusals by Corporations Canada). However, this has no impact on provincially incorporated companies, unless the name in question is registered as a trademark. If the name is registered as a trademark, then it's true that the protection on the name is increased.

Myth #3: Companies must keep "a" company book

It is customary for companies to keep their various registers and books in a black book or binder, with a plate bearing the company's name (the minute book). In reality, corporate law does not require that all registers and books be kept together in one book. Each register and book is distinct, and can be kept separately from the other. It is therefore more accurate to speak of "the books" of a company than "the book".

Myth #4: Updating the Registraire des entreprises is enough to "remove" a shareholder

This is not the case. To remove a shareholder from a company, the shares must be validly transferred, either to another shareholder or to the company itself (in which case the transferor's shares are cancelled). Any share transfer requires either the endorsement of the share certificate, or written instructions to register the share transfer (for uncertificated shares). Updating the Company Registrar does not change shareholder status.

Myth #5: Corporations mean lower taxes

It's true that corporations generally enjoy a lower tax rate than individuals. However, it should not be forgotten that the corporate shareholder will pay personal income tax when the company pays him a dividend or salary. The main tax advantage of incorporation is that it allows tax deferral , by controlling the disbursement of corporate surpluses.