New Year, New Venture: Getting Your Start-Up Structured Right from Day One

The new year is often when founders decide to turn an idea into a formal business. Incorporation is usually the first legal step, but doing it properly requires more than filing out forms online. 

A strong start-up incorporation and structuring package takes founders from early planning decisions through to a corporation that is legally sound, compliant, and ready to operate from day one. Getting these steps right early reduces risk and avoids costly fixes later. 

Step One: Deciding Whether to Incorporate at All 

Incorporation is not always the default answer. Before forming a corporation, founders should consider: 

• The nature and risk profile of the business 

• Whether outside investors are anticipated 

• How profits and losses should be treated for tax purposes 

• The desired flexibility in ownership and management 

While corporations are the most common structure for growth-oriented businesses, other entities, such as partnerships or sole proprietorships, may be appropriate in specific circumstances. Choosing the wrong structure early can limit financing options, complicate governance, or require restructuring at an inconvenient stage of growth. 

Step Two: Choosing the Right Jurisdiction 

Founders must also decide whether to incorporate federally or provincially (for example, in Ontario). One of the main factors that often influence this decision is director residency requirements. 

Director Residency Requirements: 

• Federal corporations must have at least 25% of their directors be resident Canadians, or at least one resident Canadian if the board has fewer than four directors. 

• Ontario corporations have no Canadian residency requirement for directors. 

For founders that intend to include non-resident Canadian directors, this difference alone can determine whether federal incorporation is practical. 

Step Three: Designing the Corporation’s Internal Share Structure 

The next question is how the corporation will be structured internally. Corporations can be structured in many different ways, and these choices are reflected in share rights, restrictions, conditions, and governance rules.  

At this stage, founders begin making concrete structural decisions including: 

• How many classes of shares the corporation should have 

• Who will control voting and decision-making 

• How economic value will be shared among founders, advisors, and future investors 

These decisions are reflected in the corporation’s articles of incorporation, by-laws, organizational resolutions, and, where appropriate, a unanimous shareholders’ agreement. While they can be amended later, doing so often requires shareholder approvals, regulatory filings, and added costs, which makes early planning especially important. 

Step Four: Building the Corporation’s Legal Foundation 

Once the corporation structure is defined, those decisions must be reflected in the corporation’s foundational documents, which is commonly referred to as the articles of incorporation. 

The steps involved in preparing and filing the articles of incorporation typically include: 

• Selecting and reserving an available corporate name 

• Drafting articles of incorporation that reflect the intended share structure and ownership model 

• Filing the articles of incorporation in the chosen jurisdiction 

Step Five: Organizing the Corporation 

After incorporation, the corporation must be organized so it can operate in practice, this is commonly referred to as a minute book. 

The minute book usually includes: 

• Adopting by-laws that govern directors and shareholders meetings, voting, director and officer authority 

• Appointing directors and officers 

• Authorizing and Issuing shares 

• Preparing share certificates and maintaining required corporate registers and ledgers 

• Approving banking arrangements 

• Appointing accountants 

Deficiencies in the minute book are one of the most common issues identified during financings, regulatory review and transactions, and can delay or otherwise complicate such matters.  Maintaining and updating your minute book is strongly advised on an annual basis and is, in fact, mandatory. 

Step Six: Post-Incorporation Requirements 

Incorporation does not end on the filing day.  

Founders must also address: 

• Applying for a business number and relevant tax accounts 

• Completing extra-provincial registrations if the business operates outside its home jurisdiction 

• Obtaining any required provincial or municipal licenses 

Ongoing compliance is essential to keeping the corporation in good standing. Think of your corporation as a living entity that requires maintenance and upkeep.   

Other Considerations: Professional Corporations Require Additional Planning 

For regulated professionals, such as physicians, dentists, lawyers, accountants, and other licensed practitioners, they may be required to incorporate under a Professional Corporation, which involves additional statutory and regulatory requirements. 

Professional Corporations (“PCs”) are still business corporations, but they differ from ordinary business corporations in several ways, including:  

• Restricted Business Purpose: Limited to providing licensed professional services 

• Naming Requirements: Often requiring words such as “Professional Corporation” or “Société professionnelle” 

• Regulatory approval or registration with the applicable governing body  

• Limits on Liability Protection: Incorporation generally does not shield professionals from personal liability for their own malpractice 

• Ownership and Control Restrictions: Typically requiring voting shareholders (and sometimes directors and officers) to be licensed professionals 

In some jurisdictions, certain PCs may include family members or trusts as non-voting shareholders, but this varies across the provinces. 

Summary 

Many of the most expensive corporate clean-ups occur not because founders made bad decisions, but because key decisions were made too late, or without proper legal advice. A thoughtful incorporation and organization process helps ensure that a company is structured to support growth, investment, and regulatory compliance from the outset.  

At Froese Law, we help founders navigate incorporation and structure their business with clarity and foresight. We can ensure your business is built to operate properly today and adapt confidently tomorrow.